Portfolio A
The bad years came first.
Retires at sixty‑two with one million dollars. Takes fifty thousand in the first year and raises it three percent a year for inflation.
Portfolio B
The bad years came last.
Retires at sixty‑two with one million dollars. Takes fifty thousand in the first year and raises it three percent a year for inflation.
Twenty‑five annual returns. The same twenty‑five, in both columns. The only difference between these two people is the order they arrive in.
Identical in both columns
- $1,000,000Starting balance
- $50,000First year withdrawal, raised 3% every year after
- 5.72%Average annual return across the twenty‑five years
- 4.95%Compound annual return. Identical in both columns, because reordering a set of numbers cannot change what they multiply to
Different in one column
The order.
That is the whole experiment. Nobody earns a better return, nobody saves more, nobody spends less. One of them simply happens to retire into three bad years, and the other happens to meet those same three years at the end.
Averages are computed over a whole life. Withdrawals are taken one year at a time. Money removed from a portfolio in a down year is not available to recover, and the difference between those two facts is the entire subject of this page.
Bad years first
Balance
$1,000,000
Withdrawn to date $0
Bad years last
Balance
$1,000,000
Withdrawn to date $0
Both take the same money out, every year, without flinching. Neither of them is earning a better return than the other.
One of them is selling into three down years to fund the withdrawal. Those dollars leave before the recovery arrives, so they are not there to recover.
Year 15. Age 76. One of them is empty.
The other has ten years left to run, and it runs them alone.
What actually happened
Same returns. Same average. Same withdrawals. Different order.
| Portfolio | Total withdrawn | Balance at year 25 | Ran out |
|---|---|---|---|
| A · bad years first | $862,339 | $0 | Year 15, age 76 |
| B · bad years last | $1,822,963 | $992,235 | No |
Portfolio B took $960,624 more out of the account across those years and still finished with $992,235 in it. Nobody in this experiment was smarter, more patient, or better advised. One of them was born four years earlier.
What defends against it
-
An income floor
Bills that do not stop get covered by income that does not depend on the market. Guaranteed income is not a return strategy. It is the thing that means a down year never has to be funded by selling.
-
A reserve, sized on purpose
Cash for the near term exists so the withdrawal in a bad year comes out of the reserve instead of out of the assets that were supposed to recover.
-
A withdrawal order decided in advance
Which account gets drawn, in which year, chosen before it is needed rather than in the middle of the year that tests it.
All three are the same architecture, drawn in the method.
You do not get to pick which order you retire into.
You do get to decide, in advance, what happens if it is the wrong one. That is a thirty minute conversation with no product in it. Book a call, or read the letter I write most weeks and decide later.
Hypothetical example for illustrative purposes only. It does not represent any actual investment and the returns shown are not indicative of any specific investment. It does not reflect the deduction of fees, expenses or taxes, which would reduce results. Past performance is no guarantee of future results. No strategy assures success or protects against loss.
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA / SIPC. The LPL Financial registered representative associated with this site may discuss and transact securities business only with residents of the states in which they are properly registered or licensed.
The twenty‑five returns used, in the order Portfolio A receives them: -19%, -11%, -22%, +21%, +8%, +4%, +17%, -9%, +12%, +15%, +2%, +13%, -5%, +19%, +6%, +10%, -14%, +16%, +5%, +22%, +1%, +14%, +9%, +18%, +11%. Portfolio B receives the same list reversed.
← James Ustby, CFP® · © 2026