What Is Sequence of Returns Risk?

Sequence of returns risk is the danger that poor investment returns early in retirement can permanently damage your nest egg — even if your long-term average return looks fine on paper.

Here's why: when you're withdrawing money from a portfolio that's already dropping, you're locking in losses. The remaining balance has less to recover with, and the math may never catch up — even when markets eventually rebound.

Two retirees with the exact same average return over 30 years can end up with wildly different outcomes simply based on when the bad years happened. Bad years early are far more damaging than bad years late.

Defenses include keeping 1–3 years of expenses in cash, building a guaranteed income floor with Social Security and annuities, and using a flexible withdrawal strategy. We help clients build retirement plans that are resilient — not just optimistic.