Sequence risk in retirement.

Sequence of returns risk: same average return, different orders, dramatically different retirement outcomes. 1M with 40k withdrawals annually: bad returns first (-20%, +5%, +25%) leaves you with 747k. Good returns first (+25%, +5%, -20%) leaves you with 859k. Same 3.3% average - 112k difference from luck of timing.

Example: retiree starts with 1M, withdraws 40k/year. Same 3.3% average return over 3 years. Order 1 (bad first): -20%, +5%, +25%. Year 1: (1M - 40k) × 0.80 = 768k. Year 2: (768k - 40k) × 1.05 = 764k. Year 3: (764k - 40k) × 1.25 = 905k. Order 2 (good first): +25%, +5%, -20%. Final: 945k. Same average return, 40k difference.

Why sequence matters in retirement: withdrawing during downturns locks in losses (selling more shares at low prices). Recovery has less capital to regrow. Sequence risk highest first 5-10 years of retirement. Mitigation strategies: (1) Bond tent (higher bond allocation early retirement), (2) Cash reserves (2-3 years expenses), (3) Variable withdrawal (cut spending in down years), (4) Working part-time first 5 years to reduce withdrawal pressure. Accumulation phase: sequence doesn't matter (all years compound equally without withdrawals).

Run it with sensible defaults

Using starting portfolio balance of 1,000,000, annual withdrawal of 40,000, year 1 return of -20%, year 2 return of 5%, the calculation works out to 36,900.00. Nudge the inputs toward your own situation and the output recalculates instantly. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Starting Portfolio Balance, Annual Withdrawal, Year 1 Return %, Year 2 Return %, and Year 3 Return % — do not pull with equal force. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

How the math works

Compare ending balance with same returns in different sequences (bad first vs good first). The working is transparent — you can verify every step yourself in the formula section below. No black box, no opaque "proprietary model".

Why investors run this

Most people's intuition for compounding is wrong — not because the math is hard, but because linear thinking doesn't account for curves. Running numbers through a calculator like this one is the cheapest way to recalibrate that intuition before making an irreversible decision about contribution rate, asset mix, or retirement age.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.