Our Concepts

Sequencing of Returns

Are you worried about running out of money in retirement? If you are depending on a traditional Wall Street approach, two factors that are out of your control can make a huge impact on whether you can depend on your portfolio for the duration of your retirement years. Those two factors are luck and timing. Do you want more control? Maybe Wall Street isn’t really working for you.

The concept of sequence of return risk is about the risk of lower or negative returns in the early period of retirement when you are taking withdrawals from the underlying investment portfolio. This order is very important for those that are living off the income and capital of their investments. If you start taking money out at the bottom of the market, you will have better investing success in your retirement than if you were to start at the peak of the market. This is true even if long-term averages were the same.

Retirement year also makes a huge difference in whether you will run out of money or whether you will have plenty. Two different people, with the same portfolio structures both retire at age 65 with $100,000. If one retired in 1969, and takes 5% per year for retirement, he or she would be completely broke by age 84 because of the down market. If the other person retired in 1979, those booming markets would have increased the size of his or her account to $592,000 with the ability to afford many more years of retirement without having to depend on Social Security.

We can help you structure your portfolio and plan your retirement in the most beneficial way so that all of your retirement years are covered.