Two retirees with identical portfolios, identical withdrawal rates, and identical average returns can end up with wildly different outcomes, one dies wealthy, the other runs out, entirely based on the SEQUENCE of returns in their first decade. This tool runs your plan against a smooth baseline and three real historical bad starts, and shows you which would have killed it.
During accumulation (when you are contributing), bad years actually help: you buy more shares at lower prices, and average cost in. During withdrawal (when you are pulling from the portfolio), bad years hurt twice: the market drops AND you are selling shares to fund spending, locking in losses you would have otherwise ridden out.
Average return assumes a smooth path. Real markets do not deliver smooth paths. They deliver lumpy ones. The lumps that come early in retirement can be terminal.
Five defenses that actually work: (1) hold 2 to 3 years of cash and short bonds so you do not sell equities into a downturn, (2) use a dynamic withdrawal rule (Guyton-Klinger guardrails) instead of a fixed 4%, (3) build a "bond tent", heavier fixed income for years -5 to +5 around retirement, then de-risk back into equities, (4) delay Social Security to 70 as longevity insurance, (5) stay flexible on spending in early bad years: the most powerful lever you have, by a wide margin.
A bad first decade is the crisis this tool shows you in advance. Write your response now, while calm, so you rehearse the behavior.
If market headlines are driving your decisions, test your plan against real bad starts first.
It is the risk that bad returns arrive early in retirement, while you are withdrawing. Two retirees with the same portfolio, withdrawal rate and average return can end up very differently based only on the order of returns in their first decade. Early losses hurt twice: the market drops and you sell shares to fund spending.
It depends on which crash and how long the horizon is. This tool runs your withdrawal against a smooth 6% real baseline plus three real bad starts (2000, 2008 and 1973) and reports the highest annual withdrawal that survives all of them. With its default $1M over 30 years, that is $42,000.
The page lists five defenses: hold 2 to 3 years of cash and short bonds, use a dynamic withdrawal rule such as Guyton-Klinger guardrails, build a bond tent around retirement, delay Social Security to 70 as longevity insurance, and stay flexible on spending in early bad years. That last one is the most powerful lever by a wide margin.
Average return assumes a smooth path, and markets deliver lumpy ones. While you contribute, bad years help because you buy shares cheaper. While you withdraw, bad years lock in losses you would otherwise ride out. This tool assumes 100% stocks; the page notes a 60/40 mix would smooth drawdowns and raise the safe rate.
If you are within 5 years of retirement, this is the most important conversation you can have.
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