Investment Management · 3 min read
Sequence Risk Still Matters
Sequence risk is one of the clearest examples of why average returns do not tell the whole story. Two investors can earn the same long-term average and still end up with very different outcomes if the bad years arrive at different moments.
For retirees and near-retirees, the order of returns often matters as much as the returns themselves.
Why timing matters more in retirement
Before retirement, market losses are painful but future contributions can help. During retirement, withdrawals change the math. Selling after a sharp drawdown reduces the capital base that would otherwise recover in a rebound. That is what makes the sequence of returns so important.
This does not mean retirees should avoid growth assets. It means portfolio design, reserve sizing, and withdrawal flexibility become more important because they help keep the plan from relying on forced sales after the wrong year.
How to manage the risk without hiding from markets
Reserve assets, diversified fixed income, flexible spending rules, and tax-aware withdrawal sequencing can all help. So can setting expectations properly. A retirement portfolio is not just an investment machine. It is an income system that has to survive both bad timing and ordinary life changes.
That is why sequence risk is a planning problem as much as an investment one. The solution usually comes from the structure of the whole plan, not from trying to guess the next bear market in advance.
How this may apply to your plan
If retirement is close or already underway, it may be worth reviewing whether your current mix of cash, bonds, and equities was designed with sequence risk in mind or simply inherited from the accumulation years.
Sources and further reading
Next steps
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The views and opinions expressed here are those of The Financial Sciences Company as of the publish date and are provided for informational and educational purposes only. They are not personalized investment, tax, or legal advice. The Financial Sciences Company, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Additional information is available in our Form ADV at adviserinfo.sec.gov.
General educational information, current as of 2026. Figures and rules change. For guidance specific to your situation, speak with a qualified professional.