OurFirePath
RiskRetirement

📉 Sequence of Returns Risk

See why the order of market returns matters as much as the average. Compare early-loss vs early-gain scenarios on the same portfolio.

The core insight: Two portfolios can have the same average annual return over 30 years yet produce radically different outcomes depending on when the bad years hit.

Because you withdraw money in retirement, a market crash early on forces you to sell more shares at low prices. Those shares can never recover for you — you already sold them.

Good start

Strong market years 1–5, then below-average returns. Same long-run average as the other scenarios.

Average returns

Steady average return every year. The theoretical baseline — real returns are never this smooth.

Bad start

Bear market years 1–5, then above-average returns. Same long-run average — but the damage is already done.

Portfolio value over time

All three scenarios start with the same portfolio and average the same return. The difference is timing.

Why this matters for FIRE: Early retirees are most vulnerable because they have the longest time horizon and start withdrawing immediately. The standard mitigation strategies — a cash buffer of 1–2 years, flexible spending that dips in down markets, and a bond tent around retirement — all target this specific risk.