H5game8

Home
Retirement
Retirement Planning

I'm a Financial Adviser: This Is How You Can Minimize the Damage of Bad Market Timing at Retirement

Poor investment returns early in retirement on top of withdrawals can quickly drain your savings, so it's critical to build flexibility into your plan to avoid selling assets at a loss.

By Tommy Snyder published 27 January 2026 in Features

When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works.

Share Share by:

Copy link
Facebook
X

Share this article Print Join the conversation Follow us Add us as a preferred source on Google Newsletter Subscribe to our newsletter

Worried senior woman examining a bill

(Image credit: Getty Images)

The start of retirement is an exciting time.

For years, you worked and perhaps raised a family while always keeping an eye on the future.

You consistently set aside money, with the express purpose of funding your lifestyle during your golden years.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Now, with retirement near, or if it's already begun, you're ready to put those investments to use for both necessities and cherished bucket list items.

But all investments carry some degree of risk. They can lose value, sometimes significantly, when markets fluctuate.

When you're young, with years of investing ahead of you, it can be easier to take those losses in stride. You know you'll likely recover them over time.

But when the market experiences a substantial decline, the outcome can be quite different for those nearing or just beginning retirement. Once you stop contributing to investment accounts and start taking distributions, it can be harder to recover from a big loss.

About Adviser Intel

The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

A portfolio that was supposed to help provide income for a long retirement could come up short.

The possibility that ill-timed market declines could affect the longevity of your nest egg is known as sequence of returns risk, which can pose a serious threat to retirement success.

What is sequence of returns risk?

Sequence of returns risk is the danger that poor investment returns early in retirement, combined with regular withdrawals, can deplete your portfolio much faster than anticipated.

Even if your long-term average return reflects a solid performance, early losses could mean you'll have to sell assets at a lower value, reducing the size of your portfolio and limiting your ability to recover when the market rebounds.

No one can predict what the market will do from one week to the next, much less in the years ahead. This means that two retirees with identical portfolios and withdrawal strategies could experience substantially different outcomes based solely on the sequence of returns they encounter at the time they choose to retire.

The chart shows how the sequence of returns could affect two hypothetical retirees with the same $1 million portfolio (fully invested in the S&P 500 index) and a $75,000 annual withdrawal rate. The striking difference in their balances after 10 years illustrates the challenge that sequence of returns risk presents.

Graphic shows sequence of returns risk.

Note: These hypothetical examples are provided for illustrative purposes only. Source: finance.yahoo.com

How can you avoid this?

The worst way to deal with sequence of returns risk is to cross your fingers and hope that the market will stay strong, or at least stable, at the start of your retirement.

Winging it is not the way to go, and it could make matters worse if you make decisions based not on sound planning but on emotions, such as denial, fear or despair.

Preparing for the possibility that the market could decline at just the wrong time is critical. That means building plenty of flexibility into your plan so you don't become locked into taking portfolio withdrawals that require selling at a loss. Some strategies that can give you that flexibility include:

Drawing from safety assets

Pulling from cash reserves, short-term bonds or other safety assets can give your riskier assets time to recover from a loss.

The tricky part is deciding what portion of your investment should be parked in safety vehicles.

During employment, the general rule is to keep three to six months of income in liquid investments, but in retirement, that might not be a sustainable strategy.

If the markets were to rebound fairly quickly, as they did after the 2020 COVID-19-related crash, you'd be OK. But your money likely wouldn't last through a longer slump, such as the 2008 financial crisis.

You might want to look at a "bucket" strategy that allocates funds for use during specific (short-, mid- and long-term) phases of your retirement. A knowledgeable financial adviser can help you determine what your income plan requires and how to invest with both safety and growth in mind.

Implementing an efficient withdrawal strategy

When multiple accounts are available, tax-savvy retirees typically draw from their taxable assets first, then tax-deferred accounts (401(k), 403(b), traditional IRA, etc.) and finally, their Roth accounts. But diverging from this strategy during a market downturn could help you prevent losses from affecting your overall retirement outlook.

Accessing funds from a tax-free Roth account during a downturn might help you manage tax bracket creep, reduce tax exposure and avoid triggering the Medicare IRMAA surcharge and potential taxes on a portion of your Social Security benefits, keeping more money in your pocket.

This strategy can also allow your tax-deferred assets to recover and preserve your traditional IRA for future growth.

The market has no impact on Social Security benefits, making these a reliable income source. When you choose to claim those benefits is an essential part of retirement planning.

If the market is strong, and you can get the income you need from your investment gains, you might decide to delay filing for Social Security. But claiming your benefits sooner might make sense during a down year if it helps you reduce withdrawals from your investments.

It's definitely worth running the numbers for various scenarios so you understand your options.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.

Proactively managing RMDs

A required minimum distribution (RMD) is a government-mandated amount that retirees must withdraw each year from certain tax-deferred retirement accounts, generally starting at age 73.

These required withdrawals can force retirees to sell assets during a market downturn, potentially locking in losses.

Proactively allocating a portion of your tax-deferred accounts to safety assets is one way to prepare for this potential pitfall.

Another is to take your distributions during market highs instead of on a predetermined, inflexible schedule.

You might want to consider the benefits of completing a Roth conversion before you reach the age at which RMDs become a factor.

Better prepared than scared

Experiencing a market downturn early in retirement can be damaging, but it doesn't have to ruin your future. If you've recently retired or are close to retirement, there are steps you can take to preserve the longevity of your nest egg.

The sooner you make the necessary adjustments, the better off you'll be. Don't hesitate to ask for professional guidance if you need help evaluating the various strategies that can protect you and your family.

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

I'm a Financial Planner: How to Dodge a Retirement Danger You May Not Have Heard About
The 'Sequence of Returns' Risk Could Shrink Your Retirement Nest Egg
A Retirement Plan Isn't Just a Number: Strategic Withdrawals Can Make a Huge Difference
Top Four Retirement Withdrawal Strategies to Maximize Your Savings
7 Tax Blunders to Avoid in Your First Year of Retirement, From a Seasoned Financial Planner

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

TOPICS Adviser Intel Get Kiplinger Today newsletter — freeContact me with news and offers from other Future brandsReceive email from us on behalf of our trusted partners or sponsorsBy submitting your information you agree to the Terms & Conditions and Privacy Policy and are aged 16 or over.

Tommy SnyderSocial Links NavigationFinancial Adviser, Harlow Wealth Management, Inc.

Tommy Snyder is a financial adviser at Harlow Wealth Management, Inc. He earned his Master of Business Administration at Binghamton University in New York and holds a bachelor's degree in business administration from Pacific Lutheran University. He holds a life and disability insurance license and has passed the Series 65, the NASAA Investment Advisers Law Examination.