Sequence of Returns Risk: Why the First Years of Retirement Matter Most

Two retirees can experience the exact same average annual return over 30 years and end up with very different outcomes, purely because of the order those returns occurred in. This is called sequence-of-returns risk, and it matters most when you're simultaneously withdrawing money from a portfolio.

If a market downturn happens in the first few years of retirement, you're forced to sell more shares at depressed prices to cover the same withdrawal amount, permanently reducing the number of shares left to benefit from the eventual recovery.

This risk is a key reason some early retirees choose a lower initial withdrawal rate, keep 1–2 years of expenses in cash to avoid selling into a downturn, or use flexible withdrawal strategies that reduce spending in years following a market drop.

This calculator's projection uses a constant assumed real return each year, which is a simplification — real markets don't move in a straight line. Use the results as a general estimate of trajectory, not a guarantee, and consider stress-testing your plan against historical bad-sequence scenarios.