Posted in r/Fire with 52 upvotes. This hits home for a lot of people — here's the real answer.
Just like the headline states....early in retirement we have sequence risk of returns. Meaning the risk that if there were a large bear market early on, and we withdrawl on top of that, we could run out of money late in retirement. Makes 100% sense to me. But...how does one know when they are PAST this early risk phase? Are there good rules of thumb or mathematical models that do this? Right now...I am just using a glide path of shifting 1% more each year back to equity. To be clear, on day one of retirement, I am doing a 65/35 mix. Then after one year, going to a 66/34 mix. I continue until I hit an 85/15 mix OR when ever my bond/gold mix reaches A TOTAL of 5 years of ESSENTIAL expenses (minus social security/annuity income). I wont go below that floor.
Sequence of return risk is a concern for the first 10-15 years of retirement. Thereafter, portfolio growth and withdrawal rate become the primary drivers of sustainable withdrawals.
I'm sorry to hear you're feeling stressed about retirement planning. It's a common struggle, and the good news is there are some concrete steps you can take to gain clarity. The root cause of this confusion is that retirement planning involves a lot of moving parts - investments, taxes, healthcare, longevity, and more. It's natural to feel overwhelmed when trying to put it all together, especially if you're new to this. The Flexible Withdrawal Strategy and The Withdrawal Flexibility System in our guide can help you simplify the big picture. First, I'd suggest doing a Reality Audit using the worksheets in Chapter 1. This will give you a clear picture of your current retirement savings, projected income, and potential gaps. From there, you can start exploring age-adjusted and simplified withdrawal approaches to see what might work best for your situation. The Healthcare Bridge Strategy is also crucial - it can help you navigate the tricky transition from employer-sponsored coverage to Medicare. Understanding how this fits into your overall plan will give you greater peace of mind. The good news is, once you have these foundational elements in place, you can start to relax a bit about sequence of return risk. Generally speaking, as you move further into retirement, your portfolio becomes less sensitive to short-term market fluctuations. But the specifics will depend on your unique circumstances, which is why it's so important to get the basics right first. Putting in the work upfront may feel daunting, but it will pay off hugely in the long run. You'll be able to approach the rest of your retirement with confidence, knowing you've built a solid plan to support your goals. Wishing you all the best on this journey!
FREE ACTION PLAN
Drop your email and we'll send you the 7-step action plan from The Retirement Reality Check free.
No spam. Unsubscribe anytime.