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Sequence of Returns Risk Calculator
Model how a bad run of returns early in retirement can permanently deplete your portfolio even when long-run average returns are fine. Compare two scenarios side by side.
Portfolio after 30 yr (bad start)
$197,332
Portfolio after 30 yr (smooth returns)
$3,833,824
Shortfall caused by bad sequence
$3,636,492
Year portfolio depletes (bad sequence)
30
30 = survives full period
How the math works
Sequence of returns risk is the danger that poor early returns permanently impair a portfolio that's being drawn down. Even with the same average return, bad years at the start can deplete savings decades earlier.
Mitigation strategies include a cash buffer, a bond tent, or reducing withdrawals during down markets (dynamic withdrawal).
EveryCalc calculators are designed for fast, practical estimates with transparent inputs and no required account. We use plain formulas, visible assumptions, and related tools so visitors can check the result from more than one angle.
Results are informational only. For financial, tax, legal, medical, construction, or other high-impact decisions, verify the output against primary sources or a qualified professional.
Learn more about our review process on the EveryCalc methodology page.
How this calculator works
What this page estimates
This Sequence of Returns Risk Calculator is built to give a quick, browser-based estimate for sequence of returns risk. Model how a bad run of returns early in retirement can permanently deplete your portfolio even when long-run average returns are fine. Compare two scenarios side by side. The inputs stay on the page during normal use, and the result should be treated as an estimate for planning, comparison, or education rather than professional advice.
Calculation approach
The calculator applies the standard relationship implied by the inputs, then formats the answer so it can be checked and reused. For finance tools, the most important step is using consistent units, rates, time periods, and assumptions before comparing the result with another calculator or outside quote.
Example workflow
For example, start with a realistic value you already know, change one input at a time, and watch how the answer moves. That makes it easier to tell whether the result is being driven by the main amount, the rate, the time period, or a unit conversion.
Practical checks
- Use current, real-world numbers when the result affects money, health, tax, or legal decisions.
- Run a low, base, and high case when the inputs are estimates.
- Check the related calculators below when the next decision depends on a different assumption.
How to interpret the sequence of returns risk result
Best use
Use the result as a planning number for comparing payments, rates, returns, tax reserves, or cash-flow choices before you request a quote or make a commitment.
Cross-check
Compare the answer with the contract, lender estimate, tax form, brokerage statement, payroll record, or invoice that will control the real-world outcome.
Watch for
Do not rely on a single optimistic rate, return, or fee assumption. Money pages work best when you run low, base, and high cases and keep professional advice separate from the estimate.
This page belongs to the Finance calculator library, so the answer should be read in the context of the decision you are modeling rather than as a universal rule.
Before relying on this sequence of returns risk estimate
Most calculator mistakes come from the inputs, not the arithmetic. Use this short audit before you reuse the answer in a spreadsheet, quote, application, or important conversation.
Confirm source numbers
Match balances, rates, fees, taxes, income, and payment dates against the lender quote, payroll record, tax form, statement, invoice, or contract.
Separate cash flow from total cost
A lower monthly payment can still cost more over time if fees, interest, taxes, or a longer term are hidden in the structure.
Run conservative cases
Test at least one higher-cost or lower-return case before using the output for a purchase, refinance, investment, loan, or tax decision.
Rerun this page when the rate, price, term, fee, tax rule, income, expense, or expected holding period changes.
How to Use
- Enter your starting portfolio value and planned annual withdrawal.
- Set your average expected annual return.
- Enter how many bad years you fear at the start and what return those years might deliver.
- Compare the two 30-year ending balances to see the damage from bad timing.
Frequently Asked Questions
What is sequence of returns risk?
It's the risk that poor investment returns early in retirement permanently impair your portfolio, because withdrawals force you to sell at low prices — leaving less to recover during good years.
How is this different from average return risk?
Two portfolios can have the same 30-year average return but radically different outcomes if one starts with three crash years and the other ends with them. Sequence, not just average, matters when you're withdrawing.
How do I protect against this risk?
Common strategies: keep 1–2 years of spending in cash, use a bond tent (high bonds at retirement, gradually shifting to stocks), or use dynamic withdrawals (spend less in down years).
Does this affect the accumulation phase?
Sequence risk applies mainly during drawdown. During accumulation you're adding money, so buying low during crashes is actually beneficial. The risk reverses at retirement.
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