Don't Let the Market Ruin Your Retirement
Kiplinger's Personal Finance|May 2022
When portfolio losses hit at the same time as withdrawals, it’s a double whammy. Here’s how to mitigate the risk.
Adam Shell
Don't Let the Market Ruin Your Retirement

AFTER SQUIRRELING AWAY money in a 401(k) or IRA for decades, the last thing you need is a stock market downturn at the start of your golden years. Market sell-offs are always painful, but they pose a greater risk when they occur early in retirement, when you’re no longer earning a paycheck and are withdrawing money from your nest eggs.

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.

This story is from the May 2022 edition of Kiplinger's Personal Finance.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.

This story is from the May 2022 edition of Kiplinger's Personal Finance.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.

MORE STORIES FROM KIPLINGER'S PERSONAL FINANCEView All
A SOLID YEAR FOR THE KIPLINGER 25
Kiplinger's Personal Finance

A SOLID YEAR FOR THE KIPLINGER 25

All but one of our favorite actively managed, no-load mutual funds gained ground as markets recovered.

time-read
10+ mins  |
May 2024
YOUR VACATION HOME COULD PROVIDE TAX-FREE INCOME
Kiplinger's Personal Finance

YOUR VACATION HOME COULD PROVIDE TAX-FREE INCOME

If you plan to rent out your vacation home, it's important to understand how your proceeds will be taxed.

time-read
3 mins  |
May 2024
IT'S NOT YOUR IMAGINATION: YOUR CEREAL BOX IS SHRINKING
Kiplinger's Personal Finance

IT'S NOT YOUR IMAGINATION: YOUR CEREAL BOX IS SHRINKING

To avoid raising prices, some manufacturers are reducing the size of common grocery items. Here’s how to fight back.

time-read
2 mins  |
May 2024
SHOULD YOU WORRY ABOUT BEING LAID OFF? IT DEPENDS ON YOUR INDUSTRY
Kiplinger's Personal Finance

SHOULD YOU WORRY ABOUT BEING LAID OFF? IT DEPENDS ON YOUR INDUSTRY

Downsizing has hit certain sectors. But cutbacks may be slowing, and some companies are expanding.

time-read
4 mins  |
May 2024
How identity thieves are exploiting your trust
Kiplinger's Personal Finance

How identity thieves are exploiting your trust

Con artists themselves are disguising as well-known brands to steal your money and personal information.

time-read
3 mins  |
February 2024
CUT THE COST OF YOUR WIRELESS BILL
Kiplinger's Personal Finance

CUT THE COST OF YOUR WIRELESS BILL

AT&T, T-Mobile and Verizon dominate the market, but smaller outfits offer similar network coverage at lower prices.

time-read
10 mins  |
February 2024
MAKING HOME ENERGY MORE AFFORDABLE
Kiplinger's Personal Finance

MAKING HOME ENERGY MORE AFFORDABLE

Households in need can get energy-efficiency upgrades, help with utility bills and more from this nonprofit.

time-read
2 mins  |
February 2024
A HEAD START FOR SAVERS
Kiplinger's Personal Finance

A HEAD START FOR SAVERS

The Saver's Credit is designed to help low- and middleincome taxpayers contribute to a retirement account.

time-read
2 mins  |
February 2024
Say I Love You With a Money Date
Kiplinger's Personal Finance

Say I Love You With a Money Date

To nurture a lasting bond with your partner, meet regularly to talk about money.

time-read
2 mins  |
February 2024
Plan for Your Own Elder Care
Kiplinger's Personal Finance

Plan for Your Own Elder Care

AFTER I wrote a series of columns in 2022 about elder care planning for family members, I received a number of responses like this one: “What about married couples who have no children or whose family members don’t live nearby?” wrote one reader. “Or a single individual with no close relatives? How should these people plan for their own elder care?”

time-read
2 mins  |
February 2024