This article was written by Darrow advisor Kristin McKenna, CFP® and originally published by Forbes.
There’s plenty for investors to worry about when their financial livelihood is on the line. When planning for major financial decisions such as retirement, individuals often focus on the severity of a market downturn, underestimating the impact that timing and cash flows can have on their portfolio.
The sequence of returns risk is the impact the order of investment returns can have on your portfolio. As individuals move from the asset accumulation stage of their life to withdrawing assets in retirement, the sequence of returns risk will also shift. Considering the timing and severity of market activity, along with your planned contributions or withdrawals, can help you better prepare for the unknowns.