Retirement income
Sequence-of-returns risk
Sequence-of-returns risk is the risk that poor investment returns arrive early in retirement rather than later, permanently reducing how long a portfolio lasts even if the average return over the whole period is identical.
Also called sequence risk
While you are saving, a downturn is an opportunity: contributions buy more. While you are drawing, the same downturn is a loss you cannot recover from, because you sold shares at the bottom to fund living expenses and those shares are not there for the rebound.
This is why two retirements with the same average return can end very differently, and why the first several years of drawing income carry more weight than any others. It is also why 'what if the market drops’ is a structural question about the plan rather than a question about markets.
What it does not do
Sequence risk is not solved by a higher average return, and it is not measured by a risk-tolerance questionnaire. It is managed structurally, with an income floor, deliberate liquidity, and a written answer for what you would draw from in a bad year, decided before the bad year.
This entry is a general explanation, not advice for your situation, and it deliberately avoids thresholds and figures, because those are the part most likely to be out of date. Reviewed August 27, 2026. If a decision turns on any of it, ring the office rather than relying on a page.
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These interact with it.
From definition to your situation
Whether this applies to you is a different question.
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