Sequence of Returns

The span of time that can impact your income the most is the period just prior to and immediately following retirement. As you approach this period, a significant drop in the value of your investments may reduce your retirement income over the long term. And if you are taking withdrawals, your savings may deplete faster. Conversely, a gain in your assets can increase your retirement income. This effect on your income is called the sequence of returns.

The calculator below shows a comparison of three scenarios with the same average annual return over a 10-year period beginning at the time you start drawing an income. These scenarios illustrate what happens to your savings if markets produce:

• Stable return—Market returns are stable throughout the 10-year period.
• Good start—Market performs well in the first few years and then poorly thereafter.
• Bad start—Market performs poorly in the first few years then better thereafter.