Sequence of Returns Risk Calculator

Two retirees can earn the exact same average return over their careers and still end up in completely different places. What separates them is the order in which good and bad years arrive. When you are drawing income, a steep loss in the first few years of retirement does lasting damage, because you are selling shares to cover withdrawals at depressed prices and have less capital left to recover when markets rebound. That timing risk is the focus here.

Behind the scenes the tool runs two deterministic projections, not a Monte Carlo simulation: both paths use the very same annual returns, simply reordered. The 'Good-First' path front-loads the strong years and tails off with weaker ones; the 'Bad-First' path does the reverse. In each year the model first deducts your stated annual withdrawal from the balance, then applies that year's return to whatever remains. The six returns are fixed: +20%, +15%, +10%, −5%, −15% and −25% on the Good-First path, and the same numbers in reverse on the Bad-First path. After those six years both paths continue for the number of additional years you choose at the six-year average, which is 0%, and the withdrawal stays the same dollar amount throughout.

Treat the output as an illustration of risk rather than a forecast, since real markets will follow their own course. The trap worth avoiding is planning around a single steady average and assuming the path will be smooth, which hides how punishing early losses can be. Holding a cash buffer and spreading income across several sources are common ways retirees soften the blow when a bad sequence shows up first.