During your accumulation years (while you’re working), you are not subject to this risk because you are not withdrawing money. But when you retire (during your distribution phase) you will be.
Sequence of returns risk is a result of the timing of withdrawals from a retirement account that can have a negative impact on the overall rate of return on the investment. This may seriously hurt a retiree who depends on the income stream from a lifetime of investing.
In our next blogpost, we will use two examples to illustrate this risk.