The Worst Time To Retire?

Life is about timing. Graduating in 1999 would've placed you into a booming economy with jobs galore. Graduate a year later and you'll struggle for an interview (post-tech crash). Through no fault of your own, a full 180 in your life trajectory.

Timing can be the sole difference between success and failure. Retirees know this all too well. As investors, we face the risk of retiring into a down market, known as sequence of returns risk.

Positive returns in the early years of retirement equals a larger nest egg to withdraw and grow from. Retiring into a bear market would mean withdrawing and growing from a depleted position - kicking your portfolio while it's down.

Even the same returns could lead to starkly different outcomes depending on the order (20%, 10%, -30% Vs. -30%, 10%, 20%). The sequence matters. Returns compound and how you start will be the difference between an upward or downward spiral.

A strong start in football could mean the difference between winning and losing. The same holds true for retirement. But returns are out of our hands. Some of us will just have bad luck. It's no reflection of our skill or character. Just timing. All we can do is be aware and ready. This means saving enough to have a comfortable cushion regardless of what happens. Hope for the best, plan for the worst.

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Herman Ye

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