When it comes to the retirement life stage, there are several risks that retirees specifically face. Understanding these risks, and having a retirement plan in place, can help you weather these obstacles.
You may be familiar with some of these risks, for example, longevity risk, inflation risk or expenditure risk just to name a few. However, one you may not be familiar with is sequencing risk.
In short, sequencing risk is the possibility of negative returns at or near retirement affecting the market value of your investments, which can’t be recouped as you are drawing down to fund your retirement lifestyle. Notably, in the long-run, this can impact your investments’ ability to support future drawdowns.
In this animation, we illustrate in further detail what sequencing risk is, how it can impact you, and strategies to help manage it.