How Can “Sequence of Return” Help or Harm You?
Clearly, there is a lot to think about when planning for retirement. While we have a degree of control over many of the choices involved, there’s one big wild card called sequence risk.
Sequence risk is the risk that you’ll encounter negative investment returns in early retirement. This is an important consideration, because the random sequence – or order – in which you earn your returns early in retirement can have a significant impact on your lasting wealth. Simply put, a retirement portfolio that happens to experience positive returns early in retirement has a better chance to outlast an identical portfolio that must endure negative returns early in retirement (if withdrawal amounts are not adjusted) … even if their long-term rates of return end up the same.
Since nobody can predict which return sequence they’ll experience early in their retirement, every family should prepare for a range of possibilities with their retirement planning. > SEE MORE
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