It happens by Thursday afternoon.

Millions of people fill out their brackets with total confidence. Then a 12-seed takes down a favorite, and the whole thing falls apart.

That is March Madness. The upsets are the point.

But there is a version of that same upset in retirement.

It is quieter, less obvious, and the consequences last a lot longer than a busted bracket.

It is called sequence of returns risk. For anyone near retirement, or already in it, this is one of the important ideas to understand.

The order of returns matters

Most people assume retirement is about average returns. If the market averages seven or eight percent over time, the math works out.

Not quite.

When you are drawing income from your portfolio, the order of returns matters just as much as the returns themselves.

A major market decline in the early years can do lasting damage that even a strong recovery cannot fully undo.

Here is why.

When markets drop and you still need income, you sell shares at lower prices to cover expenses.

Those shares are gone. They cannot participate in the recovery.

Two retirees with the same average returns over 30 years can end up in very different places, depending entirely on when the bad years hit.

That is not intuition. That is arithmetic.

What 2022 reminded us

Market declines are not theoretical.

In 2022, stocks fell sharply. Bonds fell at the same time.

Retirees drawing income took hits from both directions at once.

The point is not that 2022 was catastrophic. For most people, it was not.

The point is that a plan built only around average assumptions carries more risk than it appears to on paper.

A static plan is not built for a dynamic world

This is where the traditional rules of thumb show their limits.

The 4% rule is a useful starting point. But it was not designed around your specific situation.

Your income sources. Your flexibility. The market conditions the year you actually retire.

It is a guideline. Not a personalized plan.

Our approach builds structure around your income from day one.

It identifies where your money is coming from in years one through five of retirement, with the goal of reducing pressure on your portfolio during the window when you are most vulnerable.

Social Security timing, reliable income sources, and a thoughtful withdrawal strategy can all act as shock absorbers.

When markets struggle, a well-structured plan may help your income avoid bearing the full impact.

The stress test most plans skip

One of the exercises we do with clients is running their plan against various market downturns throughout the history of the market.

What would have happened if you retired just before the dot-com crash? The 2008 financial crisis? The stagflation of the 1970s?

Not because those scenarios will repeat exactly.

But because knowing how your plan holds up under real stress changes how you experience a downturn when it arrives.

There is a real difference between watching your portfolio fall and wondering what it means, versus watching it fall and already knowing the plan.

The Bottom Line

A busted bracket costs bragging rights. A retirement income plan not built for volatility may cost years of financial flexibility.

The good news is that the sequence of returns risk is manageable. But it takes planning before you need it, not after.

If you have not stress-tested your plan against a difficult early market, that conversation is worth having.

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​Keeping wealth in focus,

The MY Wealth Management Team