Why is the sequence of return risk so important?
Why the Sequence of Returns is so Important to Retirees
- Most investors go through life making a series of periodic investments to their savings plan(s), which is called “Dollar Cost Averaging”
- Dollar-Cost Averaging is one of the most common forms of periodic investing. It involves continuous investment of the same dollar amount at predetermined intervals.
- This strategy helps you continue to invest, even when the investments price levels fluctuate.
- In early years, because you have time on your side (hyperlink), your focus should be on accumulating shares and keeping the fees and investment-related expenses relatively low.
The Timing of Distributions Makes a Difference
- During retirement, the timing of investment returns can have a dramatic impact on your account.
- Withdrawing assets in a down market early in retirement can significantly impair your portfolio over the long term.