Topic 6 – Sequence of Returns Risk

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Sequence risk could be a negative or a positive for you in retirement. It depends on how the market acts.I’d like to make one thing perfectly clear for all investors. If I could propose to you a defined outcome investment plan, where you felt sure that your returns would fall within a parameter and that they could also help you define your outcome on your income plan, would you be interested in that? Could we possibly miss out on worrying about sequence risk whatsoever? Let’s get into sequence risk and understand what its threats are to our retirement income planning. It would be best if we started out with a definition of sequence of returns risk. Investopedia provides us the following definition. Sequence risk is also called sequence of returns risk, and it’s the danger that the timing of withdrawals from a retirement account will have a negative impact on the overall rate of return available to the investor. This can have a significant impact on a retiree who depends on the income from a lifetime of investing and is also no longer contributing new capital that could offset losses. So we’re moving out of our accumulation years now into our distribution years, and we have to pay close attention to the fact that we’re not adding money into this portfolio anymore. We’re taking it out.