Sequence-of-returns risk is the danger that retirement returns happen in an unfortunate order — bad years early in retirement when your balance is largest, instead of late when it's smaller. The maths is unforgiving: drawing down a depressed balance crystallises losses that can never be recovered, even if the market eventually returns to its long-run average. Two retirees can experience identical AVERAGE returns over 30 years and one runs out of money 8 years earlier than the other purely because of the sequence.

The classic example: retiree A retires in 1973 (start of a 9-year bear market), retiree B retires in 1982 (start of an 18-year bull). Both end up with the same long-run average annual return; A runs out of money in their late 70s, B dies wealthy. The difference is entirely sequence — A's withdrawals during the early bear deplete the principal that should have compounded through the recovery.

Standard mitigations: cash buffer (keep 1-3 years of withdrawal needs in cash so you don't sell growth assets at depressed prices); glide path (reduce equity allocation in the early years of retirement, then re-rise — counterintuitive but reduces sequence risk); flexible spending (cut withdrawals 10-20% in years following major drops). Pair this calculator with our Account-Based Pension Calculator for the steady-state projection.