Early Losses Hurt Most
A 25% market drop in year 1 of retirement is far more damaging than the same drop in year 20. You're selling shares at low prices, leaving fewer to recover when the market rebounds.
What if the market crashes the year you retire? Enter your numbers below and see the baseline vs crash scenario instantly — free, no signup.
Two retirees with identical savings and identical average returns can have wildly different outcomes depending on when the bad years happen. This is sequence of returns risk.
A 25% market drop in year 1 of retirement is far more damaging than the same drop in year 20. You're selling shares at low prices, leaving fewer to recover when the market rebounds.
Your average return might be 7% over 30 years, but if the bad years come early while you're withdrawing, your portfolio may run out. Order matters, not just average.
Use our stress test to see your worst-case scenario. Then build a plan with cash buffers, flexible withdrawals, or reduced equity exposure to protect against timing risk.
Enter your numbers above and instantly see baseline vs crash outcomes. Adjust crash year and magnitude to test different scenarios.
Set your portfolio, annual spending, expected return, and years. This becomes your baseline scenario.
Select which year the simulated crash occurs — year 1, year 5, year 10, or any year in your timeline.
Choose how severe the crash is — 20%, 30%, 50%. The stress test spreads this over 2 years (matching the full projector).
See your baseline vs crash scenario side by side. The impact shows how much the crash costs you at the end of your timeline.
Once you understand your exposure to sequence of returns risk, you can take steps to protect your retirement.
Keep 1-2 years of expenses in cash or short-term bonds. Draw from this buffer during downturns so you don't sell equities at a loss.
Use a flexible withdrawal strategy that reduces spending in bad years. Cutting 10-20% in a down market can significantly extend portfolio life.
Gradually shift to a more conservative allocation as you approach retirement. Less equity means less exposure to early-year crashes.
Sequence of returns risk (SoRR) is the danger that poor market returns early in retirement will deplete your portfolio faster than poor returns later. If you retire into a bear market and start withdrawing, your portfolio may never recover — even if average returns over your retirement are fine.
When you're withdrawing from your portfolio, early losses are devastating. A 25% drop in year 1 means you're selling more shares to cover expenses, leaving fewer shares to benefit from future recovery. The same 25% drop in year 20 has less impact because you've already grown your portfolio.
Enter your portfolio, annual spending, expected return, years, crash year, and crash magnitude above. The calculator instantly shows your baseline outcome vs the crash scenario, so you can see the impact of timing.
Common strategies include: maintaining a cash buffer for 1-2 years of expenses, reducing equity allocation as you approach retirement, using a flexible withdrawal strategy that reduces spending in down markets, and delaying Social Security to reduce early withdrawals.
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