But make no mistake: This silent partner sits in every retiree’s portfolio, quietly influencing whether your money comfortably lasts 25 years or runs out 10 years too soon.

And the tricky part? Most retirees don’t even know it exists.

Let’s fix that.

When average returns lie

If you’ve ever been told, “The market averages 7%-10% over time,” you probably felt a sense of comfort. After all, if that average holds, your retirement should be smooth sailing.

But here’s the truth every retiree needs to hear: You don’t live on average returns. You live on actual returns — year by year, good or bad.

And when you’re withdrawing money to live on, the order of those returns matters more than almost anything else.

This is sequence of returns risk.

To understand it, let’s take two fictional retirees — Tom and Jerry.

Both start retirement with $1,000,000.

Both withdraw $50,000 per year, adjusted for inflation.

Both average the exact same market return over 20-25 years.

But they experience those returns in a different order.

Tom’s early retirement years: +12%, +8%, +11%, +9%…

Jerry’s early retirement years: -12%, -15%, +2%, -8%…

Same averages. Same long-term performance.

Yet Jerry runs out of money somewhere around year 18.

Tom? He still has a healthy portfolio after 25 years.

Why?

Because Jerry had to withdraw money during the bad years — locking in losses and shrinking his account so much that even future growth couldn’t catch him up.

That’s sequence of returns risk in action.

“But I’m a long-term investor!”

If you’re 45, that mindset works. You’re adding money, not withdrawing it. Down markets become opportunities.

But the moment you retire, everything flips.

Now you’re taking money out.

Imagine climbing a mountain: Getting to the top is only half the journey. The descent is where most accidents happen. Retirement works the same way.

The accumulation phase is the climb.

The distribution phase — the descent — is where sequence of returns risk lives.

And it’s why retirees need different tools than pre-retirees.

Why early bad years hit so hard

Let’s break the math down simply.

If your $1,000,000 drops by 20%, you’re at $800,000.

But if you then withdraw $50,000 to live on, you’re down to $750,000.

To get back to your original $1,000,000, you’d need a return of 33%, not 20%.

And if those bad years happen early, before growth compounds, the portfolio never truly recovers. The snowball is rolling down the wrong side of the hill.

The market will always recover eventually, but your portfolio might not.

That’s the danger.

A Real-World Example: 2008 retirees versus 2010 retirees

Two retirees with identical plans.

Same nest egg.

Same withdrawal strategy.

The only difference?

One retired in 2008. The other retired in 2010.

The 2008 retiree saw the market drop nearly 40% right at the start.

The 2010 retiree enjoyed 12 straight years of mostly positive returns before a downturn.

Same average returns.

Wildly different outcomes.

This is why sequence of returns risk is less about how much you’ve saved and more about how well your income is protected early in retirement.

Your retirement plan has three jobs

Once you’re done working, your money has to pull off a tricky balancing act:

1. Provide stable income you can rely on
2. Keep up with inflation
3. Withstand market volatility without falling apart

Most retirees only focus on Job No. 1.

Some think about Job No. 2.

Very few think about Job No. 3.

That’s where sequence of returns risk hides — right in that third job.

The role of fixed index annuities, or FIAs

(Educational, not salesy — just the “why” behind the tool)

You don’t need to love annuities to understand why they exist, just like you don’t have to love seatbelts to understand why cars come with them.

FIAs were designed with one purpose in mind: To give retirees a portion of market-linked growth without exposing their nest egg to market-linked losses.

How does this help with sequence of returns risk?

Because the single most damaging event is a loss in the early years of retirement.

And FIAs solve that problem in two ways:

1. Zero is your hero

In an FIA, a bad year in the market doesn’t shrink your account.

You may not earn interest, but you also don’t lock in a loss.

This simple feature alone dramatically reduces sequence of returns risk.

2. Optional income riders create predictable paychecks

These riders can guarantee income

that doesn’t depend on market performance at all.

That’s a game-changer.

It means you don’t have to sell when the market is down. You don’t have to guess when to time your withdrawals. And you don’t have to hope that your portfolio rebounds fast enough.

Instead, you can let growth-focused assets recover while your income comes from a protected source.

This isn’t about replacing your entire investment strategy with an annuity.

It’s about stabilizing the “descent” portion of your journey so the rest of your portfolio can breathe.

A better way to think about retirement risk

Most people think risk is simply about volatility.

But in retirement, the two risks that matter most are:

1. Running out of money
2. Being forced to withdraw during a downturn

You can’t control markets.

You can control how much exposure you have to those early bad years.

Think of an FIA like a shock absorber: The bumps still exist, but they don’t rattle your entire financial life.

The bottom line

Sequence of returns risk is one of the least understood forces in retirement planning — but one of the most impactful. A retiree could spend 40 years saving, invest wisely and still run out of money simply because the market stumbled in the wrong years.

But you don’t have to take that chance.

With the right mix of protected income, thoughtful withdrawal planning and tools designed specifically for retirees — not accumulators — you can turn uncertainty into stability.

Because the silent partner in your retirement plan doesn’t have to be a threat.

With the right strategy, it can become the reason your money lasts as long as you do.

Lyle Boss, The REAL BOSS Financial, endorsed by Glenn Beck as the premier retirement advisor for Utah and the Mountain West States. Boss Financial, 955 Chambers St. Suite 250, Ogden, UT 84403. Telephone: 801-475-9400. https://www.safemoneylyleboss.com/