Quick Thoughts: Sequence of Returns Risk

Nate Crosby |
Categories
dynamic growth
Life Insurance

 

Quick Thoughts: Sequence of Returns Risk

Listen to the full episode here or wherever you get your podcasts.

When planning for retirement, much of the conversation centers on one question: What rate of return can I expect from my investments? However, once you begin withdrawing money from your portfolio, another factor can become just as important: the order in which those returns occur. This is known as sequence of returns risk, and it can have a significant impact on how long retirement assets last.

Two retirees can begin retirement with identical portfolios, withdraw the same amount of money, and even experience the same average annual return over 20 years. Yet one could finish in a much stronger financial position simply because the bad market years happened later rather than earlier.

Understanding this risk—and planning for it before retirement—can make a meaningful difference.

In this podcast, you will hear:

  • Why the Order of Returns Matters
  • Retirement Stress-Testing 
  • Traditional Diversification 
  • Creating an "Off-Market" Source of Income
  • Tax and Estate Planning 

Build the Contingency Before You Need It

Nobody knows whether the first year of retirement will coincide with a bull market, a bear market, or something in between. That's why planning matters. The question isn't simply, "What return can my portfolio earn?" A more useful question may be: "If the market falls when I need income most, where will my next retirement paycheck come from?"

Answering that question before retirement can help build a more resilient retirement-income strategy.

 

 

 

Disclaimer: Crosby Advisory Group, LLC is a registered investment advisor. This newsletter is for general knowledge and is not intended to be individual investment advice. Investing involves risk including potential for loss. Understand all risk and fees before investing. NMD Insurance is affiliated with Crosby Advisory Group, LLC.