Don’t Overlook This Hidden Retirement Risk

by Peter A. Longo
December 6, 2022
After working so hard to save for retirement, it’s important to be aware of potential risks that arise when you stop earning and start withdrawing. This article explores some solutions you may consider to help protect your retirement income from sequence of returns risks.

During your working years as you save and invest, it’s the average annual return you’re making on your money over time— not the individual year-to-year returns— that matters most.

When you’re saving and accumulating assets, the risks associated with a few years of negative returns are relatively negligible. Periodic market downturns can simply be viewed as opportunities to purchase more shares at lower prices. But when you transition to spending rather than accumulating (withdrawing assets), a few years of negative returns early on, combined with annual withdrawals, can serve to speed up the depletion of your assets.

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The examples provided are all hypothetical and do not take into account any specific situations. The hypothetical examples are provided to help illustrate the concepts discussed throughout and do not consider the effect of fees, expenses, or other costs that will affect investing outcomes. Any actual performance results will differ from the hypothetical situations illustrated here. Please consult a professional to help you evaluate your situation before implementing any of the strategies discussed here.

 

Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

About the author

Peter A. Longo

Vice President, Director of Insured Solutions Consulting

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