Retirement & Income Strategy
If the market drops sharply in my first year of retirement, will I still be okay?
This concern has a name: sequence of returns risk. It's one of the most important factors in retirement planning, and it's often overlooked. A market drop early in retirement can have lasting effects that a drop later cannot.
Why Timing Matters
When you're withdrawing money to live on, a market decline forces you to sell more shares to maintain your income. Those shares can't participate in the eventual recovery. This is fundamentally different from the accumulation phase when you could simply wait out volatility.
Strategies We Use
Cash reserves: Maintaining 1-2 years of expenses in stable assets provides a buffer during downturns.
Bucket strategy: Segmenting your portfolio by time horizon, with near-term needs in conservative investments.
Flexible spending: Building a spending plan with some discretionary cushion allows you to reduce withdrawals temporarily if needed.
Diversified income sources: Social Security timing, pension decisions, and annuity considerations all factor into reducing sequence risk.
Planning for the Unplannable
We can't predict when markets will decline, but we can build a plan that's resilient to that uncertainty. The goal isn't to avoid all risk—it's to ensure your lifestyle doesn't depend on market timing.
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These scenarios represent common situations we help families navigate. Each client's circumstances are unique, and outcomes vary. This content is for educational purposes only and does not constitute financial advice.
