Sequence of Returns Risk

Until the early 90s, it was commonly assumed that your withdrawals from a portfolio could be about the same as the average market return, and if you stayed below the market average then your portfolio would last forever.

That strategy failed because it ignored a basic reality: your specific retirement cohort does not experience the smooth historical average. Market conditions during your first five to ten years of distributions dominate lifetime portfolio survival.

Retiring into a severe bear market impairs portfolio longevity far beyond the headline drop, creating permanent capital depletion. This phenomenon is known as sequence of returns risk. Because sequence matters as much as the arithmetic mean, static average returns cannot determine a safe spending level.