BacktestFolio · Glossary
Sequence Risk
In plain language
Two people with the same portfolio and the same withdrawal rate can have completely different outcomes: whoever retires just before a bear market risks depleting capital far earlier than someone who starts afterwards. It is the number one danger of the decumulation phase.
Technical definition
Risk that negative returns in the early years of withdrawals permanently reduce capital, leaving the portfolio unable to generate the returns needed to sustain withdrawals even if long-term average returns would have been sufficient.