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When you retire, market whims shouldn’t determine if you make it or not. Our case study highlights what is known as sequence of returns risk, showing the power of diversification in reducing such risks.

Two Individuals


Both have $1,000,000 and want to draw $45,000 in each year of their retirement, adjusted for inflation with a 4.5% withdrawal rate.

The S&P investor and the diversified investor

One investor places his assets in the S&P 500. The other diversifies.

Here's how they fared


The S&P investor experienced a great run, concluding with a substantial portfolio of $3,730,000. His ending draw of $58,000 represented 1.6% of his portfolio, putting him in great shape. The diversified investor ended his run with $1,308,000, and his ending draw represented 4.5% of his portfolio. He was in solid shape, just not as well off as his counterpart.

They begin Jan 1, 1990

Unbeknownst to the investors, they embarked on their journey during a fantastic decade for U.S. stocks.

Two Time Periods
Their Friends


Both investors shared their story with their younger friends, detailing their first decade as retirees.

Second Time Periods

They begin Jan. 1, 2000

Unbeknownst to the investors, they embarked on their journey during a terrible decade for U.S. stocks. Let's see how they fared during this challenging period.

The friends followed suit

Their friends retired making similar investing choices, each beginning with the same amount and draw.

Here's how their friends fared

The Results


The S&P 500 investor experienced a poor run, ending with $369,000. His ending draw of $56,000 represented a daunting 15.2% of his remaining portfolio. As a result, he was in bad shape and his retirement funds were severely depleted. The diversified investor fared much better. He ended his run with $1,334,000, and his ending draw represented 4.2% of his portfolio. He was in fine shape. 

In both scenarios the diversified investors ended with $1.3M portfolios even though they retired during very different periods.

Let's look at what happened to our original retirees over the 20-year period.

Original twenty years

Over the first twenty years the S&P 500 investor ended up wealthier, with assets of $2,670,000 and an ending portfolio draw of 2.9%. The Diversified Investor ended with assets of $1,727,000 and a portfolio draw of 4.2%, slightly better than where he started.

What happened to our second set of retirees over their 20-year period?

First 20.png

The second twenty years


The S&P 500 investor ended the twenty-year period with just $50,000, and his annual withdrawal is now $67,000, more than his entire portfolio. By the time you read this, he may be out of money. The Diversified investor ended the period with $1,320,000. His portfolio draw is 5.1%, suggesting a more secure financial position.

The sequence of returns matters. Will you experience positive or negative returns early on?  Risk matters.  Higher risk portfolios will likely have higher ups and lower downs. Range of returns matters. When we are on track to reach our goals, our aim is to reduce both our risk and our likely range of outcomes. That is what we are laser-focused on.

Lastly, to wrap up, let’s look at all of four of the ten-year periods in one chart, and all four of the two-decade periods in one chart.


Absent a crystal ball, we are aiming for the green lines. We believe that a slow and steady pace wins the race. If you have 'made-it' and want to lock in your pace, join us. Let's work together to embark on a more stable financial future, so you can spend your time thinking about the things you love rather than your portfolio.

Let's chat.

Risk is defined as standard deviation for the purposes of this letter. *Diversified portfolio is defined as equally split between U.S. stocks, international stocks, U.S. bonds, international bonds, real estate, gold and commodities, rebalanced annually and excluding fees, taxes, or other costs. This is not a template for how we manage money, but it is a template for how we show the benefits of diversification. The views expressed are the views of Randy Kurtz as of the date on this document and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. Past performance is not indicative of future performance. Individual results will vary, sometimes substantially, from any results discussed here. Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, a forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy. Any returns presented do not include the effect of fees of any kind or taxes.

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