What does sequence-of-returns risk mean?
When withdrawals are happening, a loss in the first years of retirement can leave fewer dollars available for later growth. This calculator keeps the same returns and changes only their order so you can see that timing effect directly.
Compare retirement return sequences
Enter annual returns from oldest to newest. The tool compares your entered order with the same returns arranged bad-first and good-first.
Your inputs stay in this browserResult
Calculate to compare the same returns in three different orders.
| Year | Bad early | Entered | Good early |
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The retirement withdrawal formula
This calculator uses a simple beginning-of-year withdrawal model. For each year, it subtracts the planned withdrawal from the opening balance, then applies that year's return to what remains.
The withdrawal grows by the inflation rate after each surviving year. If the requested withdrawal is larger than the available balance, the scenario is marked as depleted in that year.
Why return order matters
Two portfolios can experience the same set of annual returns and the same average return but finish with different balances when withdrawals are taken along the way. A bad-first sequence is not a forecast. It is a controlled illustration that isolates timing from the return set itself.
How to use the calculator
- Enter the balance available when withdrawals begin.
- Enter the withdrawal planned for year one. Use the same dollar basis as the balance.
- Set an inflation assumption for later withdrawals.
- Paste annual returns from oldest to newest, then compare the three scenarios.
Sequence-of-returns questions
What is sequence-of-returns risk?
Sequence-of-returns risk is the possibility that the order of investment returns changes a retirement portfolio's outcome when withdrawals are being made. Poor returns early in retirement can do more damage than the same returns later, even when the average return is identical.
How does this sequence-of-returns calculator work?
Enter a starting balance, first-year withdrawal, inflation rate, and annual returns. The calculator applies each withdrawal before that year's return, then compares the entered order with the same returns sorted bad-first and good-first.
Does a bad return sequence mean a portfolio will run out of money?
Not necessarily. The result depends on the balance, withdrawals, inflation, return sequence, time horizon, fees, taxes, and other cash flows. This calculator is an illustration, not a forecast or a safe-withdrawal recommendation.
Why are withdrawals applied before returns?
A simple beginning-of-year retirement model applies the planned withdrawal first, then applies the investment return to the remaining balance. This makes the timing assumption explicit and shows why early losses can reduce the capital available for recovery.
Is this retirement calculator financial advice?
No. It is an educational scenario tool. It does not account for taxes, fees, Social Security, pensions, changing spending, asset-specific returns, or personal circumstances, and it does not recommend an allocation or withdrawal rate.