Why the First Years of Retirement Matter So Much

Two people can retire with the same amount saved, withdraw the same amount each year and earn similar average investment returns. Yet one may find it much harder to make their money last.

The difference can be when the good and bad market years arrive.

While you’re working, a market decline can be unsettling, but you may still be adding to your accounts. Once you retire, you begin drawing from those savings. If investments fall early in retirement, withdrawals can leave less money invested to benefit from a later recovery. Financial professionals call this sequence-of-returns risk.¹

Same Returns, Different Order

Picture two retirees whose investments experience the same strong and weak years, but in a different order.

One enjoys several years of growth before a downturn. The other encounters that downturn just after retiring, when withdrawals are beginning. Even if their average returns eventually look similar, the second retiree may have less room to recover while continuing to take income.¹

That’s why your retirement date matters to your financial plan. Your account balance tells you what you’ve built; it cannot tell you what markets will do when you begin using it.

Pay Attention to the Years Around Retirement

The years just before and after retirement are sometimes called the retirement red zone.² During this transition, decisions about when to retire, how much to withdraw and where that income will come from can have a lasting effect.

You cannot choose the market you retire into. You can prepare a plan that gives you choices if the early years are difficult.

Depending on your circumstances, that may include:

• Setting aside money for near-term spending. This may reduce the need to sell investments during a downturn.
• Building flexibility into withdrawals. If markets are weak, you may be able to adjust some discretionary spending while continuing to cover essential expenses.
• Reviewing your investment mix and income sources. Knowing how your expenses will be funded can help you make decisions before a market decline adds pressure.

Each approach involves trade-offs. The right combination depends on your income, expenses, goals and comfort with risk.

Make a Plan for More Than One Market Outcome

No one knows whether your first year of retirement will bring a rising market, a downturn or something in between. Planning means considering how your income strategy would work under different conditions and what you might change along the way.

At Bradford Financial Center, we help you think through that transition before your last day of work. Together, we can review where your retirement income may come from, how withdrawals fit with your broader goals and how your plan could respond if markets disappoint. If you’re already retired, we can revisit those decisions as your life and circumstances change.

Retirement is a new way of using the money you’ve built. Let’s make sure you have a plan for when and how to use it.

Sources:

Morningstar, 2025 [URL: https://www.morningstar.com/retirement/how-avoid-outliving-your-retirement-savings-its-all-sequence]

Kiplinger, 2024 [URL: https://www.kiplinger.com/retirement/in-retirement-planning-consider-the-entire-journey]
 

This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2026 Advisor Websites.