The Importance of Timing in Retirement: Understanding Sequence of Return Risk
Timing is everything, especially when it comes to retirement planning. One of the biggest risks retirees face is sequence of return risk, which refers to the risk of experiencing negative investment returns early in retirement when withdrawals are being made from a retirement account. This can significantly reduce the amount of money available for retirement and potentially jeopardize a retiree's financial security.
To understand sequence of return risk, consider this example: two retirees who have identical investment portfolios and withdrawal rates, but retire in different years. Retiree A retires during a period of strong market performance and experiences positive investment returns during the early years of retirement. Retiree B, on the other hand, retires during a period of market volatility and experiences negative investment returns during the early years of retirement.
Despite having identical investment portfolios and withdrawal rates, Retiree B may be forced to withdraw a larger percentage of their portfolio to cover their expenses due to the negative returns, and therefore will have less money available for the later years of retirement. This can create a snowball effect and significantly impact a retiree's financial security in the long term.
To mitigate sequence of return risk, it's important to have a comprehensive retirement income plan that includes a diversified portfolio, a balanced withdrawal strategy, and a contingency plan for unexpected expenses or market downturns. This is where Secure Income Management can help.
Our experienced team of financial professionals takes a personalized approach to retirement income planning, with a focus on generating consistent income, minimizing risk, and maximizing wealth. We understand the importance of timing in retirement and use a variety of strategies and products to help our clients achieve a secure financial future.
Don't let sequence of return risk jeopardize your retirement. Contact Secure Income Management today to learn more about our retirement income planning services and how we can help you achieve financial security and peace of mind.
