I Retired Into the Teeth of Sequence Risk

Well, I did it. I retired into the teeth of sequence risk.

Congratulate me now because I had a plan for when I retired. I often say that the most important part of retirement (aside from setting the date) is to plan for sequence of returns risk. That, or have something purposeful to do in retirement! Is purpose more important than the money? Which one do you want to run out of first in retirement?

If you don’t want to run out of money in retirement, then you better plan for sequence of returns risk. I retired into the teeth of sequence risk!

I Retired into the Teeth of Sequence of Returns Risk

I assume you know sequence of returns risk, as it is the largest mitigatable retirement-specific risk a retiree faces early on.

Sequence of returns risk is the risk of permanent harm to a portfolio due to withdrawals during a poor early sequence of stock market returns. Even if returns improve later to prove a good arithmetic average, the damage is done as you are forced to sell low and lock in losses.

It is a risk early in retirement. Plan for sequence risk five years before retirement or learn about it as you go.

I retired into the teeth of sequence risk, as the largest proportion of the risk is in the first year of retirement. I mitigated the risk by having other sources of income and not needing current portfolio income to live on. 2022 was a bad year for both stocks and bonds.

Are We At the Bottom Yet?

So, are we at the bottom yet, 2022 was a pretty bad year for investors.

Are we at the bottom? Doesn’t matter. As money is fungible, I will keep buying when I have money and never selling unless I need the money.

And when I have money, I will buy the whole US economy.

Even if we aren’t at the bottom yet, I managed to do it! I retired into the teeth of sequence of returns risk. I’m pretty excited about that. I survived two years of retirement and sentiment went from the most predicted recession in history to new stock market highs. If that is the worst that sequence of returns risk can throw at me, then the 9% transient inflation is more painful than sequence risk.