Timing Is Everything: How Sequence of Returns Can Cost Retirees Six Figures

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A tale of two retirees with identical $2 million portfolios and $80,000 annual withdrawals highlights the critical importance of sequence of returns risk. One retiree in 1995 saw their portfolio grow to $2.4 million in 5 years before the dot-com crash, while the other retiree in 2000 had their portfolio depleted to $600,000 in just 3 years due to consecutive market declines. This over $1.4 million difference underscores how timing, not just long-term returns, can make or break a retirement plan.

Why it matters

Sequence of returns risk is the single biggest threat to large retirement portfolios, as it operates independently of long-term average returns. Selling shares at depressed prices to cover living expenses means fewer shares will be available when the market recovers, permanently impairing portfolio longevity.

The details

In the 1995 scenario, the retiree saw roughly 7% average annual growth and $80,000 annual withdrawals, allowing the portfolio to grow to $2.4 million before the dot-com crash hit. But the 2000 retiree had no such cushion, as the S&P 500 fell 9.03% in 2000, 11.89% in 2001, and 22.10% in 2002, combined with $80,000 annual withdrawals, leaving that same $2 million portfolio severely depleted after just 3 years.

• The S&P 500 has declined 7.5% year-to-date in 2026 with the VIX above 31, creating conditions where sequence-of-returns risk poses the greatest threat.
• A retiree who retired in 1995 saw their $2 million portfolio grow to $2.4 million in five years before the dot-com crash.
• A retiree who retired in 2000 had their $2 million portfolio depleted to roughly $600,000 by year three due to consecutive market declines and $80,000 annual withdrawals.

What’s next

The judge in the case will decide on Tuesday whether or not to allow Walker Reed Quinn out on bail.