Chris Patterson discusses navigating the sequence of returns risk in retirement 

Listen to the interview on the Business Innovators Radio Network: https://businessinnovatorsradio.com/interview-with-chris-patterson-retirement-income-strategist-discussing-sequence-of-returns-risk/

Understanding the Impact of Sequence of Returns Risk on Retirement Income  

Chris Patterson, a retirement income strategist, the discussion shed light on the significant impact of sequence of returns risk on retirement income. The sequence of returns risk refers to the order in which investment returns occur, especially when retirees withdraw money from their portfolio during market downturns.  

As highlighted in the episode, experiencing negative returns in the early years of retirement while withdrawing funds can have a detrimental effect on overall retirement income. For example, if retirees face a series of negative returns in the initial years of retirement and need to withdraw funds for living expenses, their portfolio can deplete rapidly. This situation increases the risk of running out of money before the end of their lifespan, leading to financial insecurity and stress.  

Chris Patterson shared a real-world example from the early 2000s, where a million-dollar portfolio experiencing three consecutive years of negative returns resulted in the funds running out within a short period. This example illustrates how the sequence of returns can significantly impact the sustainability of retirement income.    

Moreover, the psychological impact of sequence of returns risk is crucial to consider. Retirees may experience worry, fear, and doubt when they see their portfolio values decline due to market downturns. This emotional response can lead to impulsive decisions, such as moving investments to safer but lower-yielding options or taking on additional risk to recover losses. However, such reactive behaviors can worsen the negative impact on retirement income.  

To mitigate the sequence of returns risk and safeguard retirement income, Chris emphasized the importance of structuring a portfolio effectively. By adopting a bucket approach that includes safe assets, protected funds, and long-term investments, retirees can better manage the impact of market volatility on their income. This structured approach helps retirees plan for worst-case scenarios, ensuring they have a strategy in place to navigate through challenging market conditions without compromising their financial security.  

In conclusion, sequence of returns risk poses a significant threat to retirement income, especially when retirees need to withdraw funds during market downturns. By understanding this risk, adopting a structured portfolio approach, and seeking professional guidance, retirees can better protect their retirement income and achieve greater financial peace of mind.   

Chris shared: “I use 25+ years of experience on the tax side to assist clients in understanding how their recommended income strategies will impact their tax return in retirement. The goal is to minimize taxes and management fees while maximizing income in the safest way possible.” 

About Chris Patterson 

Chris is a CPA/retirement strategist/basketball coach/husband/father!  

He’s been assisting clients with tax and retirement income strategies for over 25 years, he loves what Chris does and wants to assist as many people as possible.  

Learn More: https://innovatemyplan.com/  

Past performance is not a guarantee of future performance. All strategy recommendations must be associated with a full review of a client’s personal situation.