Retirement Planning Education
Sequence of Returns Risk Calculator
Order matters. See how the sequence of market returns can impact a retirement portfolio, even when the average return stays the same, and why an early bear market can be especially devastating.
New to this? Here's the idea.
Two people can retire with the same savings and earn the same average return over their retirement, yet one runs out of money and the other doesn't. The difference is timing, when the good and bad years happen. A big loss in the first few years of retirement, while you're withdrawing money to live on, does far more damage than the same loss later. That is sequence of returns risk.
Step 1Enter your starting portfolio and the withdrawal rate you plan to take.
Step 2Scroll down to see how two return sequences, same average, different timing, play out.
Your Retirement Scenario
Your inputsStart here. Enter your starting portfolio and the withdrawal rate you plan to take. Everything recalculates instantly, there's no button to press.
↓ Then scroll down to see your results.
↓ Then scroll down to see your results.
Total retirement savings at retirement date
That's $50,000 in year 1
Fixed at 27 years, unlock to customize
🔒
Fixed at 3% per year (applied to your withdrawals)
Free to unlock, just tell us where to send it.
The two scenarios you're comparing
Same 10.4% average rate of returnBoth scenarios earn the same average return over the 27 years, the only thing that differs is the order in which the good and bad years arrive. Watch how that timing alone decides who thrives and who runs out of money.
Early gains, late losses
Good timing. Strong early years, with the biggest market losses arriving late in retirement. Because the portfolio grows for years before the downturn, it usually survives.
Early losses, late gains
Bad timing. A harsh bear market in the first few years, then a long recovery. Losing money early while you're withdrawing is what makes this the dangerous sequence.
Your results
Everything below updates automatically from your inputs above. Here's the key takeaway, followed by the ending balances, a chart of every scenario over time, and an optional year-by-year table.
Scenario comparison
Over 27 years, "Early gains, late losses" ends at $92,982, while "Volatile / same average" runs out in year 21, a spread of $92,982.
Ending balance for each scenario over your chosen time horizon, whether it stayed intact or ran out, and in which year.
Early gains, late losses
$92,982
✓ Money lasted the whole time · -91% vs start
Avg return: 6.4%
Early losses, late gains
Ran out
✗ Ran out of money in year 16 · -100% vs start
Avg return: 6.4%
Volatile / same average
Ran out
✗ Ran out of money in year 21 · -100% vs start
Avg return: 6.4%
Portfolio Balance Over Time
3 scenarios comparedEach coloured line is one scenario's balance year by year. Watch how a line that dips early (losses first) can fall to zero even when its long-run average matches the others, that gap is sequence-of-returns risk. Hover any point for exact figures.
Early gains, late losses
Early losses, late gains
Volatile / same average
A line that dips early often can't recover, even if later years are great, because you keep withdrawing money while the balance is low.
Year-by-year breakdown, every year's balance & withdrawal for each scenario Optional, click to expand the full table
| Year | Withdrawal | Early gains, late losses | Early losses, late gains | Volatile / same average | |||
|---|---|---|---|---|---|---|---|
| Return | Balance | Return | Balance | Return | Balance | ||
| Start | $1,000,000 | $1,000,000 | $1,000,000 | ||||
| Year 1 | -$60,000 | +22.1% | $1,161,407 | +15.1% | $1,091,407 | +30.4% | $1,244,000 |
| Year 2 | -$61,800 | +14.1% | $1,263,839 | +22.1% | $1,271,253 | -19.6% | $938,376 |
| Year 3 | -$63,654 | -5.9% | $1,126,133 | -7.9% | $1,107,688 | +12.4% | $991,081 |
| Year 4 | -$65,564 | +22.1% | $1,309,904 | +7.1% | $1,121,222 | -14.6% | $780,819 |
| Year 5 | -$67,531 | +12.1% | $1,401,406 | +25.1% | $1,335,574 | +22.4% | $888,192 |
| Year 6 | -$69,556 | +19.1% | $1,600,089 | -36.9% | $773,735 | +10.4% | $911,008 |
| Year 7 | -$71,643 | -8.9% | $1,386,689 | +16.1% | $826,979 | -7.6% | $770,128 |
| Year 8 | -$73,792 | +17.1% | $1,550,586 | -29.9% | $506,256 | +24.4% | $884,247 |
| Year 9 | -$76,006 | -3.9% | $1,414,739 | +24.1% | $552,464 | -4.6% | $767,565 |
| Year 10 | -$78,286 | +20.1% | $1,621,391 | +9.1% | $524,677 | +10.4% | $769,106 |
| Year 11 | -$80,635 | +8.1% | $1,672,749 | -21.9% | $329,352 | +18.4% | $829,986 |
| Year 12 | -$83,054 | -4.9% | $1,508,412 | +18.1% | $306,045 | -11.6% | $650,654 |
| Year 13 | -$85,546 | +24.1% | $1,787,008 | -14.9% | $175,023 | +26.4% | $736,881 |
| Year 14 | -$88,112 | +11.1% | $1,897,982 | +11.1% | $106,410 | -8.6% | $585,397 |
| Year 15 | -$90,755 | -14.9% | $1,525,201 | +24.1% | $41,342 | +14.4% | $578,939 |
| Year 16 | -$93,478 | +18.1% | $1,708,405 | -4.9% | Depleted | -17.6% | $383,567 |
| Year 17 | -$96,282 | -21.9% | $1,238,678 | +8.1% | Depleted | +21.4% | $369,368 |
| Year 18 | -$99,171 | +9.1% | $1,252,732 | +20.1% | Depleted | +6.4% | $293,837 |
| Year 19 | -$102,146 | +24.1% | $1,453,004 | -3.9% | Depleted | -6.6% | $172,298 |
| Year 20 | -$105,210 | -29.9% | $913,938 | +17.1% | Depleted | +29.4% | $117,743 |
| Year 21 | -$108,367 | +16.1% | $953,087 | -8.9% | Depleted | -13.6% | Depleted |
| Year 22 | -$111,618 | -36.9% | $490,169 | +19.1% | Depleted | +17.4% | Depleted |
| Year 23 | -$114,966 | +25.1% | $498,434 | +12.1% | Depleted | -3.6% | Depleted |
| Year 24 | -$118,415 | +7.1% | $415,611 | +22.1% | Depleted | +23.4% | Depleted |
| Year 25 | -$121,968 | -7.9% | $260,980 | -5.9% | Depleted | -10.6% | Depleted |
| Year 26 | -$125,627 | +22.1% | $193,136 | +14.1% | Depleted | +15.4% | Depleted |
| Year 27 | -$129,395 | +15.1% | $92,982 | +22.1% | Depleted | +8.4% | Depleted |
How to Reduce Sequence of Returns Risk
The single best step you can take
Learn more about strategies to protect yourself from sequence of returns risk by attending a full, 8-hour almost masters level class.
The class will review strategies to protect against sequence of return risk and drive real returns using advanced bucketing strategies.
Sign up for a class →Glossary, key terms defined Click to expand
- Sequence of returns risk
- Sequence-of-returns risk (or sequence risk) is the risk that the order in which investment returns occur, rather than their long-term average, determines whether a portfolio subject to withdrawals can be sustained. When money is being withdrawn, a decline forces the sale of assets at depressed prices, locking in losses and leaving fewer shares to recover when markets rebound. As a result, a run of poor returns in the early years of retirement can permanently impair a portfolio, even if the same set of returns in a different order would have left it intact. The risk is greatest at the start of decumulation, when the balance is largest and there is the least time to recover.
- Decumulation
- Decumulation is the stage of the financial life cycle in which accumulated assets are drawn down to fund spending, most commonly during retirement, as opposed to the accumulation stage of building wealth through saving and investment growth. It centers on converting a portfolio into sustainable income while balancing longevity risk (outliving one's money) against the desire for a stable standard of living.
- Arithmetic vs. geometric average return
- The arithmetic average return is the sum of each period's returns divided by the number of periods. The geometric average return, also called the compound annual growth rate (CAGR), is the single constant rate that reproduces the actual cumulative growth once compounding is accounted for. Whenever returns vary, the geometric mean is lower than the arithmetic mean, and the gap widens with volatility, so the geometric mean is the better measure of realized growth. This tool holds the arithmetic average constant across scenarios so that any difference in outcome comes solely from the sequence of returns.
- Initial withdrawal rate
- The initial withdrawal rate is the first-year withdrawal expressed as a percentage of the portfolio's starting value; for example, taking $50,000 from a $1,000,000 portfolio is a 5% initial rate. Under most sustainable-spending frameworks the rate is set at the outset and the dollar amount is then increased annually for inflation, so the percentage taken relative to the current balance varies over time. The widely cited "4% rule" refers to a 4% initial withdrawal rate.
- Real vs. nominal (inflation adjustment)
- A nominal figure is expressed in current dollars with no adjustment for inflation, while a real figure is restated in constant-purchasing-power terms by removing the effect of rising prices. Comparing cash flows in real terms reveals their true value over time. In this tool the annual withdrawal is increased by a fixed 3% each year so that the retiree's real, inflation-adjusted spending power stays roughly constant even as the nominal amount rises.
- Portfolio depletion (ruin)
- Portfolio depletion occurs when the account balance falls to zero and can no longer fund scheduled withdrawals. In retirement-income research this outcome is termed portfolio failure or ruin, and the probability of ruin is the estimated chance that a given spending plan exhausts the portfolio before the end of the planning horizon.
- Bear market
A bear market is sometimes described as a period of falling securities prices and sometimes, more specifically, as a market where prices have fallen 20% or more from the most recent high.
A bear market in stocks is triggered when investors sell off shares, generally because they anticipate worsening economic conditions and falling corporate profits.
A bear market in bonds is usually the result of rising interest rates, which prompts investors to sell off older bonds paying lower rates.
- Bond tent
- A bond tent is a retirement glide-path strategy in which the allocation to bonds (fixed income) is temporarily increased in the years just before and after retirement, then gradually reduced as equity exposure is rebuilt. Plotted over time, the rising-then-falling bond allocation resembles a tent. Its aim is to limit exposure to equity losses during the transition into retirement, the period of greatest sequence-of-returns risk, while preserving long-term growth potential later.
Important disclosure: This calculator is provided by the Retirement Education Foundation for educational and illustrative purposes only. It is not financial, investment, tax, or legal advice, nor a recommendation to buy, sell, or hold any security or to adopt any investment strategy. All results are hypothetical and do not reflect the performance of any actual investment; they exclude fees, taxes, transaction costs, and other real-world factors, and rely on simplifying assumptions, including a fixed 3% annual inflation rate applied to withdrawals. The "Early gains, late losses" and "Early losses, late gains" scenarios are illustrations that share the same 10.4% arithmetic average return, using the same set of annual returns in a different order; the "Volatile" scenario is a separate illustration set to a 6.4% average. The "2008 financial crisis," "Dot-com crash (2000-02)," and "1970s stagflation" scenarios apply actual S&P 500 total returns beginning in those years; where a horizon extends past the available data, the sequence continues with earlier historical years rather than any invented figures. Past performance is not indicative of future results, historical sequences will not repeat, and investing involves risk, including the possible loss of principal. The Retirement Education Foundation does not provide personalized financial advice, and this tool is not a substitute for personalized planning. Consult a qualified financial, tax, or legal professional before making any retirement decision.