SIMULATOR
Sequence of Returns Risk Simulator
Two people retire with the same portfolio and the same withdrawal rate. One gets a bull market in year one. The other gets a crash. Their outcomes are completely different - even if the long-run average return is identical.
Uses approximate historical S&P 500 return sequences for illustration. Not financial advice.
Your Retirement Numbers
Why the Order of Returns Is More Important Than the Average
During accumulation, a bad year just means your next contribution buys more. You recover. But in retirement, you're selling shares every year to fund your life. A 40% crash in year one forces you to sell a lot of shares at rock-bottom prices - those shares are gone forever and can never recover for you. That's sequence of returns risk.
The math is brutal: two portfolios with the identical average return over 30 years can produce wildly different outcomes depending on which years came first. The bad-start retiree may run out of money years before the good-start retiree - even though their "average return" looks the same on paper.
Common defenses: a 1-2 year cash buffer (so you don't sell stocks in a crash), a bond tent (holding more bonds early in retirement, then shifting to stocks as the risky years pass), or targeting a lower withdrawal rate (3-3.5%) to give the portfolio more room to survive a rough sequence.