Retirees Red Zone

Matthew Allgood |

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Market volatility can be unsettling at any stage—experts consider the five years before and after retirement the most vulnerable period for retirees. This vulnerability is known as “sequence of return risk”, which occurs when large market losses hit early in retirement, potentially reducing a portfolio's ability to recover and increasing the risk of outliving your savings.

 

For example, a retiree with $1 million fully invested in equities in 2000 saw sharp early losses that were difficult to recoup, especially while making withdrawals. Despite eventual market recovery, the damage from early losses lingered. That’s why our RiskFirst® Process focuses on proactively managing downside risk—especially during this critical window. By prioritizing risk management over return chasing, we aim to help protect your portfolio and stay on track with your long-term retirement goals.

Retirees Red Zone

How Sequence of Return Risk Could Hit a Theoretical Retirees Portfolio

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Source: Bloomberg, Redwood. Data as of 3/27/2025. Date Range from 12/31/1999 – 12/31/2011. Note: Analysis assumes a starting balance of $1 million invested all in equities in 2000, as tracked by the Morningstar U.S. Market Index. An initial withdrawal of $40,000 is adjusted for inflation going forward.

Regards,

Allgood Financial

Index Description: The Morningstar US Market Index measures the performance of large-, mid- and small-cap stocks in the U.S., representing the top 97% of the investable universe by market capitalization.

Disclosure: This piece is for informational purposes only and contains opinions of Redwood that should not be construed as facts. Information provided herein from third parties is obtained from sources believed to be reliable, but no representation or warranty is made as to its accuracy or completeness. Charts and graphs are for illustrative purposes only. Discussion of any specific strategy is not intended as a guarantee of profit or loss. Past performance is not a guarantee of future results. The objectives mentioned are not guaranteed to be achieved. Investors cannot invest directly in any of the indices mentioned above. Diversification of asset class is not a guarantee against loss. RiskFirst® is a registered trademark of Redwood Investment Management, LLC.

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