In our last blogpost, we introduced the sequence of returns risk for retirees. Now we will use two hypothetical examples to illustrate this risk.
The following two people having $100,000 in the market during a 10-year period and withdrawing 5% each year. You will see that the order of the returns of the market plays a big role in the final outcome.
Example 1.
The following two people having $100,000 in the market during a 10-year period and withdrawing 5% each year. You will see that the order of the returns of the market plays a big role in the final outcome.
Example 1.
Example 2.
If you look back, you will see both people started with $100,000, however, one ran out of money after 15 years, withdrawing a total of $77,593, while another has withdrawn $95,000 over the same amount of time and still has $58,043 left in her account.
In our next blogpost, we will discuss how to protect yourself from the sequence of returns risk.
In our next blogpost, we will discuss how to protect yourself from the sequence of returns risk.
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