Sequence-of-Returns Risk Stress Test
The same average annual return, applied in three different orders, against the same withdrawals — see why when a bad year happens matters more than the average itself.
Early loss
30y funded
Steady average
30y funded
Late loss
30y funded
How it works: a “down year” and an offsetting “up year” are placed at the start of retirement (early loss), the end (late loss), or not at all (steady average) — every other year uses the plain average. All three have the identical average return; only the order changes.
Why it matters: withdrawals during a down year lock in losses that a later recovery can never fully undo, because there's less money left to compound back up. This is why retirement portfolios are riskier than the same average return would suggest.
Sources & further reading