What Is Sequence Risk and Why It Destroys Retirements

Sequence-of-returns risk refers to the danger that poor investment returns occur early in retirement.

Even if long-term average returns remain strong, early losses can cause lasting damage once withdrawals begin.

This risk is especially dangerous during the first decade of retirement.

A Simple Example

Consider two retirees with identical investments.

Both earn the same average return over 20 years.

However:

Retiree A experiences strong returns early.

Retiree B experiences a major market crash during the first three years.

Despite identical averages, Retiree B’s portfolio may run out of money much sooner.

This demonstrates how the order of returns matters more than averages.

Why Sequence Risk Matters More Today

Several trends are making sequence risk more important than ever:

• Longer retirements
• Higher market volatility
• Heavy reliance on retirement accounts
• Inflation concerns

These factors increase the importance of protecting retirement portfolios during the early retirement years.

Protection Strategies Investors Explore

Financial planners often suggest:

• Maintaining liquidity
• Diversifying asset classes
• Reducing exposure to severe market volatility

Some retirees also investigate alternative assets that historically respond differently to economic stress.

Precious Metals as a Diversification Tool

Physical precious metals have been used for centuries as stores of value during uncertain economic periods.

Because their performance does not always move in lockstep with stocks, some investors use them as a hedge within diversified portfolios.

Learn How Silver Fits Into Retirement Protection Strategies

If you’re exploring ways to protect retirement savings from sequence risk, this short guide explains how silver is sometimes used as part of a broader retirement diversification strategy.

➡ Read the guide here:

[How sequence risk affects retirees]

When many retirees listen to the evening news about the economy, they

become very concerned about how market volatility directly affects them.

You can delve deeper into this question further in our guide: How to protect retirement savings from a market crash

A Retirement Protection Approach Some Investors Research

As investors learn more about sequence-of-returns risk and market volatility, some begin researching whether diversifying a portion of retirement savings into tangible assets such as physical precious metals might help balance portfolio risk.

If you’re exploring this topic, the guide below explains how silver retirement accounts work and what investors should understand first:

➡ Before moving retirement funds into silver, understand how the process works