Subject: Re: Have about 2.5 years of cash left for expenses
What's the difference between a 30% loss in the 1st year of retirement and a 30% loss in the 20th year of retirement? None. The year after the loss is the first year of the rest of your portfolio. There is nothing special about the first year.


I think there is a difference. Remaining life in the first year of retirement is x. After 20 years is x-20 which is a much smaller number than x.

When you are in a drawdown mode, with a fixed amount of withdrawal per year (not a percentage of assets), you will have more at the end of the investment period if higher returns are at the beginning of the period under study.

Example. -10% first year. 20% second year. $100 starting amount, $10 per end of year withdrawal.

Yr 0 $100
Yr 1 $80
Yr 2 $86

Example 2 20% first year, -10% second year. $100 starting amount, $10 per end of year withdrawal.

Yr 0 $100
Yr 1 $110
Yr 2 $89

So sequence makes a difference with fixed withdrawal amount. Sequence does not make a difference if a fixed percentage of current balance is withdrawn.

What can be done about it? Not much that I know about except keep the fixed amount of withdrawal to a reasonable number.
Craig