Sequence of Returns Risk (SRR) is the risk that the timing of market downturns will negatively impact the overall longevity of your portfolio. Even if your portfolio averages 7% nominal returns over 30 years, experiencing a major crash in the first 3 years of retirement is devastating, while a crash in Year 20 has almost no impact.
Why Timing Matters in Retirement
When you are accumulating wealth, market volatility is your friend because of dollar-cost averaging. However, when you start withdrawing money, you are forced to sell assets to fund your life. Selling assets during a market downturn locks in your losses, leaving you with a smaller asset base to participate in the recovery.
Use our simulator below to see the dramatic difference between experiencing a -20% crash in Year 1 vs Year 15 of your retirement.