Take two investors. Both retire with $500,000. Both plan to withdraw $20,000 per year. Investor A gets hit with a 40% crash in year one of Retirement. Their $500,000 becomes $300,000. They still need to pull $20,000 out. Now that depleted $280,000 has to carry them for the next 30 years. The math is brutal.
Investor B gets great returns in year one. Their $500,000 grows to $580,000. They withdraw $20,000. Their remaining $560,000 has room to breathe.
Same plan. Wildly different outcomes. Just because of timing.
For most of your career, market declines were actually your friend. Every paycheck allowed you to buy more shares at lower prices. Time was on your side. A bear market at age 40 was simply an opportunity to accumulate more investments at a discount.
Then something changes.
About three years before retirement, your investment strategy quietly enters a completely different phase. You're no longer building wealth—you are preparing to depend on it. The same 30% market decline that once felt like a buying opportunity can suddenly postpone retirement, force difficult spending decisions, or permanently reduce the income your portfolio can generate.
This is known as sequence of returns risk, and it's one of the biggest reasons otherwise well-designed retirement plans fail. The average annual return of your portfolio matters, but the order in which those returns occur matters even more. A major market decline early in retirement—when you begin withdrawing money instead of contributing to it—can have a lasting impact that even years of strong market performance may never fully overcome.
This is why retirement planning isn't simply about reaching "your number." It's about preparing for the transition from accumulating assets to protecting them. The years immediately before and after retirement often require a different investment strategy, one that balances continued growth with enough stability to avoid being forced to sell investments during a market downturn.
The lesson is simple:
The closer you get to retirement, the less important it becomes to maximize every last dollar of return, and the more important it becomes to protect the lifestyle you've spent decades building.