the dreaded (but not real) "sequence of return risk" category

Do you mind elaborating on this Jim?

I'm not Jim, either, but to expand on his clarification that the biggest risk is in a constant withdrawal during a downturn I played with some numbers.

Assuming each of the following four retires on Jan 1, 2030 with $100 and withdraws 4% each year as living expenses.

For Larry and Moe, that date happens to coincide with the start of a Pharaonic seven-fat-followed-by-seven-lean-years in the market. Specifically, the market returns 15% annually years 1-7, and loses 15% each year years 8-14

For Curly and Shemp, the opposite happens: a 15% annual loss years 1-7 followed by a 15% gain years 8-14

Where are they after fourteen years?

In first place is Lucky Larry. He not only starts with a 15% annual gain, but withdraws only the initial $4 annually i.e. not adjusting his withdrawal to current portfolio value. He finishes with $54

Tied for second place are Moe and Curly. While they had exactly opposite sequence of returns, and thus divergent portfolio values every year excepting only the start and end points, they each end the fourteen years with $47. This, I think, was what Jim was referring to when her referenced the "dreaded (but not real)" SORR.

Moe and Curly's trick? They each withdrew 4% of the current year's balance, spending more good times while cutting back in bad.

However, note that while Moe's low-water mark was at the very end, Curly lost all of his hair due to being down to $23 after only seven years (only 11% of Moe's balance on that date)

Sad Shemp (constant $4 withdrawal AND 15% annual loss years 1-7) is no longer heard from, having finished year 12 with only $2

(This also goes a long way to explaining why we now only hear of the three Stooges, btw)

--sutton

Numbers (apologies for not mastering any avail table function):

M L C S
$100 $100 $100 $100
$111 $110 $81 $82
$123 $122 $66 $66
$137 $136 $53 $53
$152 $152 $43 $41
$169 $170 $35 $32
$187 $191 $28 $24
$208 $215 $23 $17
$168 $179 $25 $15
$136 $149 $28 $12
$110 $123 $31 $9
$89 $101 $35 $6
$72 $83 $39 $2
$59 $67 $43 -$2
$47 $54 $47 -$7