A 67-year-old retiree’s $1.2M portfolio, fully invested in S&P 500 index funds, dropped $187,000 in three weeks, highlighting sequence-of-returns risk.
A recently retired 67-year-old saw a $1.2 million portfolio, entirely in S&P 500 index funds, decline to $1.013 million over three weeks—a $187,000 paper loss. The 16% drawdown underscores the vulnerability of retirees heavily exposed to equities during market downturns.
The retiree planned to withdraw 4% annually, or $48,000 per year, but the loss threatens long-term income stability. Financial advisors recommend reducing equity exposure to 50-60% of total assets and holding one to three years of cash in Treasury bills to mitigate sequence-of-returns risk.
Sequence risk, where early retirement losses erode portfolio longevity, remains a critical concern for retirees. Delaying Social Security benefits to age 70 and building a Treasury ladder are suggested strategies to avoid forced selling during volatility.