What is sequence-of-returns risk in retirement?
Sequence-of-returns risk is the risk that poor investment returns arrive early in retirement, while you are taking withdrawals. Two retirees with the same average return can end up in very different positions if one meets the losses first.
The reason is that selling during a decline removes shares that are no longer there for the recovery. Before retirement, when you are adding money, the order of returns matters much less.
It is a planning concept, not a tax rule. Common ways people think about it include holding a reserve, keeping spending flexible and coordinating which holdings are sold.
Reviewed by Bay Area Wealth Advisors. Last reviewed 2026-10-02. Educational information only — not individualized financial, tax or legal advice.