Most people spend a lifetime building their portfolio But almost...
Thomas Kopelman 💵@TKopelman
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Oct 08, 2026
~1 min read
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1
Most people spend a lifetime building their portfolio
But almost nobody thinks about what happens to it in the first two years of retirement
That gap is called sequence of returns risk
Here's what you need to know:
But almost nobody thinks about what happens to it in the first two years of retirement
That gap is called sequence of returns risk
Here's what you need to know:
2
Let's say you retire with $3M and plan to withdraw 5% a year
If the market drops 30% in year one while you're pulling money out, you've now locked in real losses
The portfolio never gets to recover the way it would if you could've held and waited
If the market drops 30% in year one while you're pulling money out, you've now locked in real losses
The portfolio never gets to recover the way it would if you could've held and waited
3
When you're still working and saving, a down market is actually an opportunity
You're buying shares at lower prices
When you're withdrawing, a down market is a disaster
You're selling shares at lower prices to cover living expenses
You're buying shares at lower prices
When you're withdrawing, a down market is a disaster
You're selling shares at lower prices to cover living expenses
4
A 25-40% drop while you're withdrawing can permanently hurt the portfolio
Even if markets recover, you've sold too many shares at the bottom to fully benefit from the rebound
Even if markets recover, you've sold too many shares at the bottom to fully benefit from the rebound
5
How to protect against it:
Build a cash buffer before you retire
1-2 years of living expenses in cash or short-term bonds
Build a cash buffer before you retire
1-2 years of living expenses in cash or short-term bonds
6
When markets drop, you pull from the buffer instead of selling investments at the low
You let the portfolio recover
Then replenish the buffer when it does
You let the portfolio recover
Then replenish the buffer when it does
7
Asset allocation matters more at retirement than at any other point
Not because you should suddenly go conservative on everything
But because the assets you plan to spend in the next few years should not be in equities
Not because you should suddenly go conservative on everything
But because the assets you plan to spend in the next few years should not be in equities
8
You can do everything right for 20+ years and still get tripped up by the order returns show up in retirement
Luckily, the fix doesn't have to be complicated
Most people just never think about it until they're already in retirement
Luckily, the fix doesn't have to be complicated
Most people just never think about it until they're already in retirement
