Short answer
The first years of retirement deserve a separate scenario because withdrawals turn market losses into a path-dependent problem. This example compares the same return set with losses moved to the front or back.
Illustrative scenario
This is a timing-risk illustration for early retirees. It does not predict a crash, choose a cash reserve, or recommend a spending policy. The example below uses a starting balance of $1,250,000, a first-year withdrawal of $50,000, 2.0% annual inflation, and 20 annual returns. The figures are illustrative and use no fees or taxes.
| Scenario | Ending balance | Status | Total withdrawn |
|---|---|---|---|
| Bad returns early | $0 | Depletes in year 16 | $925,486 |
| Entered order | $831,787 | Survives all 20 modeled years | $1,214,868 |
| Good returns early | $1,986,384 | Survives all 20 modeled years | $1,214,868 |
The bad-first and good-first rows use the same return set. Only the order changes. In this example the ending-balance gap is $1,986,384, which demonstrates why an average return alone does not describe a withdrawal portfolio's path.
First five annual returns in each scenario
| Year | Bad early | Entered order | Good early |
|---|---|---|---|
| 1 | -22.0% | -22.0% | +20.0% |
| 2 | -11.0% | -8.0% | +18.0% |
| 3 | -8.0% | +14.0% | +17.0% |
| 4 | -6.0% | +18.0% | +15.0% |
| 5 | -5.0% | +6.0% | +14.0% |
Withdrawals are applied at the beginning of each year, then increased by inflation for the next year. If a requested withdrawal exceeds the available balance, the scenario is marked as depleted in that year.
Questions about this scenario
What is an early-retirement drawdown?
It is a decline in portfolio value during the early withdrawal years. The combination of a lower balance and ongoing withdrawals can make recovery different from a drawdown during accumulation.
How can I use this example responsibly?
Change the balance, spending, inflation, and return series to match a scenario you want to inspect. Treat the output as one transparent illustration, not a forecast or personal recommendation.
Run your own sequence
Use the full sequence-of-returns risk calculator to change the balance, withdrawal, inflation, and annual returns. Guardfolio's other tools cover concentration, volatility, rebalancing bands, and ETF overlap.