When Jim and Kathy sold their stores in 2008, they were ready for the next chapter. They had a tidy sum saved, an advisor they trusted, and what seemed like a smart strategy: a 60/40 portfolio split between stocks and bonds. Their friends Roger and Sally did the same thing just one year later, in 2009, after wrapping up their own sale.
The situations were nearly identical. Same amount saved. Same advisor. Same allocation. One big difference: the year they retired.
For Jim and Kathy, 2008 was a disaster. Markets dropped nearly 40%. Every time they needed to pull money for income, they had to sell at a loss. Even though the markets recovered in 2009, their portfolio had already been damaged by withdrawals. They didn't fully participate in the rebound.
Roger and Sally, on the other hand, had a smooth ride. They entered retirement during a year of strong recovery. Their portfolio grew before they had to take large withdrawals. With the same advisor and same plan, their outcome was drastically better.
This is the danger of what we call sequence of returns risk.
It's not just how much your investments return—it's the order of those returns that matters.
If you hit a bad market in the first few years of retirement, and you're taking withdrawals to fund your lifestyle, you may be selling investments at a loss, locking in those losses and reducing your portfolio's ability to recover.
Here's a simple illustration:
That's the math Jim and Kathy were up against. And it's not unusual—this happens every time there's a downturn. What's worse, fear of loss causes people to sell or sit in cash and miss the recovery. The 2008 crash was followed by a massive rebound in 2009. But if you bailed, you missed it.
To visualize how much difference the sequence of returns can make, here are two examples comparing what happens to a $1 million portfolio that needs to withdraw $50,000 per year:
Retiring in 1990, a year that began a strong bull market:
Retiring in 2000, right before the tech crash and a decade of poor returns:
Even with a similar average return over time, the results are dramatically different. The early years matter most.
You don't have to time the market or retire in a "good" year. What you need is the right strategy.
Let's say you just sold your stores and put the proceeds into a brokerage account. You want to live on this money, but markets feel shaky. Here are a few strategies that can give you peace of mind and financial flexibility:
Create different "buckets" of money for different time frames:
This ensures you're never forced to sell stocks in a downturn to cover next month's expenses.
Build in a cushion that allows you to ride out downturns without panic. If markets dip, you draw from cash, not your investments.
We work with Asset Dedication as our investment manager because of their deep expertise in managing retirement income with precision and care. Their approach maps out income needs and aligns investments to match that timeline—like a personalized pension. It creates structure, clarity, and removes the guesswork.
We often use their models to stress-test plans and build income timelines that don't rely on luck.
With the right structure, you can retire with confidence, regardless of when you start.
Want a second opinion on your retirement strategy? Let's talk.
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