The rough start
Down years early
$0
Balance after 20 years
Ran dry around year 19.
Interactive explainer
Why does the order of returns matter?
A bad market early in retirement, while you are pulling money out, does far more damage than the same bad market later. This shows why, using one set of returns in two different orders.
Use this as
A way to see the risk, not a projection.
The returns here are a fixed, made-up set chosen to show the effect of order. They are not a forecast and not a real portfolio. The point is the shape of the risk and what to do about it.
Sequence of returns
The same returns, in a different order.
Both columns use one identical set of yearly returns with the same average. The only difference is whether the down years land early or late. Turn withdrawals on and off to see when the order starts to matter.
$500k$3M
$0$120k
The smooth start
Down years late
$1,727,705
Balance after 20 years
Money lasted the full 20 years in this illustration.
Same returns, same average. Because the rough years landed early while money was coming out, that path ran dry around year 19, while the other still had $1,727,705 left. The only difference was the order.
Why this is the whole point of bucket one
You cannot control the order the market delivers. What you can do is keep the next few years of spending in calm money so an early rough patch is something you wait out instead of sell into. That is the job of the near-term bucket. When in doubt, zoom out.
This is an educational illustration. The yearly returns are a fixed, made-up set chosen to show the effect of order, not a forecast, an average you should expect, or any real portfolio. It ignores taxes, fees, inflation, and spending that changes over time. The right approach for your situation should be reviewed with a qualified professional.
How to read it
Same returns, same average, different order.
Withdrawing changes the math.
While you are saving, the order of good and bad years barely matters. Once you are pulling money out, a decline and a withdrawal compound on each other.
Turn withdrawals off.
With no withdrawals, both orders end at the exact same number. That is the cleanest way to see that the order only bites when money is coming out.
This is why bucket one exists.
Keeping the next few years of spending in calm money means an early rough patch is something you wait out, not something you are forced to sell into.
You cannot control the order.
Nobody knows whether the rough years come early or late. Planning around when you need the money is how you make the plan survive either one.
Go deeper
The fix is not predicting the market. It is structure.
A plan built around when you need the money is designed to survive the years that scare people. A no-pressure Explore Call is a short conversation to see what your version of that structure could look like, and if it is not a fit I will tell you so directly.