A steep decline in the value of your shares just as you’re selling into a falling market is akin to a roadblock set up on the on-ramp to a comfortable retirement. The ill-timed one-two punch of lousy performance and cash outflows can put a dent in your retirement savings, and it can be hard for your portfolio to recover. “Those early years are really important. It’s just the way the math works,” says Rob Williams, managing director of financial planning and retirement income for the Schwab Center for Financial Research.
Wall Street refers to this investment peril as sequence-of-returns risk. The risk is that annual portfolio losses are frontloaded near the start of retirement, when you begin to withdraw funds, severely weakening your portfolio’s growth potential and its ability to provide steady income over decades despite an eventual market recovery. The sequence of returns “can make a difference between having enough money to last throughout your life span or running out of money or cutting back on the lifestyle you planned for,” says Amy Arnott, a portfolio strategist at Morningstar. Taking the same withdrawals early in retirement during an up market allows you to maintain your account value over the long term while paying yourself along the way.
Esta historia es de la edición May 2022 de Kiplinger's Personal Finance.
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Esta historia es de la edición May 2022 de Kiplinger's Personal Finance.
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