Retirement success is not based only on average market returns. The order of those returns matters, especially once you begin taking money from your accounts for everyday living. A market decline early in retirement can place more pressure on your savings than the same decline later, because withdrawals may leave fewer dollars invested for a future recovery.
At Legacy Wealth Management, we help clients look beyond a single return number and consider how income, investments, taxes, insurance, spending, and family goals fit together. By understanding sequence risk, you can build more flexibility around retirement income and make decisions with greater confidence when markets are unsettled.
Protect Your Retirement From Early Market Setbacks
Sequence risk is the risk that poor market returns happen early in retirement, while you are regularly withdrawing money from your portfolio. Two retirees could receive the same average return over a long period, yet have very different outcomes if one experiences several losses near the beginning of retirement.
Here is why timing matters. When investments fall and you sell shares to fund expenses, those shares are no longer available to grow if the market later rebounds. Your portfolio is not just recovering from a decline, it is recovering from a decline on a smaller base.
For example, a retiree may start with a portfolio designed to support annual withdrawals. If the market falls during the first few years and the retiree continues taking the same amount for living costs, more investments may need to be sold at lower values. Even if markets improve later, fewer assets remain to participate in that growth.
We often pay close attention to the first five to 10 years of retirement for this reason. That does not mean you should avoid investing or expect every downturn to derail your plans. It means retirement wealth management should include a plan for accessing income without making unnecessary investment decisions during volatile periods.
Build Flexible Income Beyond Portfolio Withdrawals
A helpful starting point is separating must-pay expenses from expenses that may be adjusted. This gives you a clearer view of how much dependable income your retirement plan needs to provide each month.
Must-pay expenses may include:
Housing and utilities
Food and insurance premiums
Basic health care needs
Transportation and recurring bills
Other spending may be more flexible, including travel, gifts, entertainment, home projects, or larger purchases. We do not view flexibility as a sacrifice. Instead, it can give you more control when markets are down and help preserve long-term investments when patience matters most.
Diversified income sources can also reduce the need to rely on portfolio withdrawals alone. Depending on your situation, those sources may include Social Security, pension income, annuity income when appropriate, rental income, or part-time work. Predictable income can help cover regular living costs, giving long-term investments more room to recover after a market decline.
Withdrawal planning matters, too. Rather than automatically increasing spending every year regardless of portfolio performance, we may help clients consider reasonable guardrails. Following a negative market year, that could mean postponing certain discretionary purchases or limiting spending increases until conditions improve. A plan with options can feel far more manageable than one that assumes every year will look the same.
Create Guardrails Around Your Retirement Income
Liquidity is one of the most practical ways to prepare for sequence risk. A cash reserve or short-term investment allocation may help cover near-term spending needs without requiring you to sell long-term investments after a decline.
The right reserve amount depends on your income needs, spending stability, other available resources, and comfort level. Someone with dependable income sources may need a different approach than someone whose portfolio provides most of their retirement cash flow. We look at these decisions as part of the larger plan, not as a one-size-fits-all rule.
Your investment mix should also reflect two competing needs: growth for the years ahead and dependable access to money today. A blend of stocks, bonds, cash equivalents, and other suitable investments may help manage volatility while still supporting long-term goals. Diversification does not remove market risk, but it can reduce the chance that one type of investment drives every outcome.
Retirement wealth management also includes regular rebalancing and thoughtful distribution planning. During a review, we may look at whether withdrawals can come from asset categories that have held up better, rather than automatically selling investments that are down. We also consider how withdrawals from taxable, tax-deferred, and tax-free accounts may affect your broader financial picture.
These guardrails work best when they are connected:
A reserve for near-term spending
An investment mix aligned with your goals
Income sources that support baseline expenses
A withdrawal plan that considers taxes and market conditions
Insurance and estate planning choices that support family priorities
Review Your Plan Before Year-End Decisions
Early fall is a natural time to review retirement income needs before year-end deadlines, holiday spending, charitable giving decisions, and next year's priorities begin competing for attention. Recent market changes, a shift in spending, health concerns, or family events may all affect the plan you created months or years ago.
We encourage clients to bring current account statements, spending estimates, income projections, and estate planning documents to financial reviews. Clear, updated information gives us a better foundation for discussing whether your withdrawal approach, liquidity reserve, and investment allocation still fit your needs.
Tax and distribution decisions also deserve attention before the calendar turns. Retirees may want to discuss required minimum distributions, charitable giving choices, projected taxable income, capital gains, and possible Medicare premium effects with qualified tax professionals. If retirement is approaching, fall can also be a useful time to revisit benefit elections and prepare for annual enrollment choices.
Retirement Resilience Requires Ongoing Attention
Market declines are a normal part of investing. The larger concern is being forced to take withdrawals during a decline without a plan for where that income will come from. A resilient retirement strategy considers how investments, income, taxes, insurance, and legacy goals may respond when conditions change.
Reviewing your liquidity, flexible spending options, income sources, and distribution strategy can help you spot pressure points before they become larger problems. Retirement plans should evolve as life changes, helping you protect the wealth you have worked hard to create while keeping your long-term priorities in view.
Build Greater Confidence in Your Retirement Plan
At Legacy Wealth Management, we help clients connect their financial decisions to the life they want to lead. Our retirement wealth management approach can help bring clarity to your investments, income planning, and long-term goals. When you are ready to discuss your next steps, contact us to start a conversation.
Legacy Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a particular level of skill or training or constitute an endorsement by the SEC. This material is provided for informational and educational purposes only and is not intended as individualized investment, tax, or legal advice or as a recommendation to buy or sell any particular investment or strategy. Investing involves risk, including the potential loss of principal. Diversification and asset allocation do not guarantee a profit or protect against loss. Tax treatment varies based on individual circumstances and applicable law. Investors should consult with their financial, tax, and legal professionals regarding their individual circumstances.