Sequence of Returns Risk: Protecting Your Retirement Assets
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Estimated Read Time 4 Minutes
Most retirement plans are built on averages.
But you don’t live in an average.
You live in a sequence.
In the accumulation years, volatility is just noise.
In retirement, when you are withdrawing income, volatility becomes a storm.
This is sequence of returns risk.
The hidden danger where timing matters as much as the math.
And where a few bad years early on can permanently reshape your future.
What if you did everything right… and still ran out of money?
You saved. You invested. You planned.
But then the markets turned.
It’s not the average return that hurts you, it’s when the bad years show up.
That’s the hidden danger called the sequence of returns.
Why do some retirees thrive while others struggle?
Here’s the paradox: Two people can earn the exact same average return, but one enjoys decades of freedom, while the other runs out of money early.
BlackRock modeled it. Both portfolios started at $1 million, both averaged 7% over 35 years. One grew to $1.1 million; the other went to zero. The only difference?
The order of returns.
Strong early years create cushion. Weak early years drain it.
This is the central challenge of retirement planning concepts.
Learning to build a durable plan when the timing is out of your control.
During accumulation, volatility is just noise. But during retirement when you’re withdrawing income it becomes a storm.
The big insight: It’s not just returns, it’s timing.
David Blanchett, Ph.D., CFP®, CFA,Head of Retirement Research at PGIM, calls this “sequence risk.”
He found that early negative returns in retirement can permanently reduce a portfolio’s ability to recover, even if the long-term average looks fine.
In his words, “Two retirees can earn the same average return yet end up in completely different places because one happened to retire into a bull market and the other into a bear.”
Translation: Luck matters. But planning matters more.
How do you preserve your wealthspan from sequence risk?
It starts with flexibility.
Instead of a fixed withdrawal rule, use a dynamic strategy that adjusts with markets.
Instead of chasing growth, use diversified income sources, interest, dividends, annuities, part-time income.
Instead of reacting, plan for volatility before it hits.
At Longevity Wealth Strategies, we call this designing your Wealthspan Plan a framework that helps your money last as long as you do, without sacrificing purpose or financial independance.
What this means for your freedom
Retirement isn’t an end. It’s a transition from earning to enjoying.
But freedom fades fast if your portfolio isn’t built to handle the unexpected.
That’s why understanding the sequence of returns isn’t just about math.
It’s about control.
It’s about ensuring your wealth supports the life you’ve worked so hard to create, no matter what the markets deliver.
Wealth that lasts.
Your wealthspan is the number of years you can live with freedom, health, and purpose supported by the right strategy.
Markets will move. That’s inevitable. But clarity creates confidence. And confidence opens the door to opportunity.
And confidence opens the door to opportunity.
Our work in retirement planning in Vienna, VA is built to give you that clarity.
To ensure your wealth lasts as long as you do
Questions people often ask:
What is sequence of returns risk? It is the risk that the timing of market withdrawals will negatively impact the long-term sustainability of a portfolio. Withdrawing money during a market downturn forces you to sell more shares to meet your income needs, which can deplete a portfolio faster than it can recover.
Why does "luck" matter so much in early retirement? If the market is strong during your first few years of retirement, your portfolio grows, creating a "buffer." If the market is weak, you are forced to sell assets at a loss. This early "sequence" often dictates whether a portfolio will last 20 years or 40 years.
How can I protect my retirement income from sequence risk? By using a "bucket strategy" or "liquidity buffer." Keeping 1–3 years of spending in cash or short-term bonds allows you to avoid selling stocks during a bear market, giving your growth assets time to recover.
What is a "dynamic withdrawal strategy"? Unlike the static "4% rule," a dynamic strategy uses "guardrails." If the market performs well, you might increase spending; if the market declines significantly, you reduce discretionary spending to preserve the principal.
See how this fits into your full financial picture.
Reading is a good place to start.
The next step is seeing how the ideas, tradeoffs, and planning decisions connect inside your own financial life.
No pressure. No obligation. Just a clear place to begin.
Disclaimer: The information provided is for educational purposes only and does not constitute investment, tax, or financial advice. Consult with a licensed professional before making financial decisions.
Sources
BlackRock, “Will My Income Last My Retirement,” Hypothetical illustration based on 7% average annual return over 25–35 years.
David M. Blanchett, D. (2022). Redefining the Optimal Retirement Income Strategy. Financial Analysts Journal, 79(1), 5–16. https://doi.org/10.1080/0015198X.2022.2129947
