When people plan for retirement, they often focus on the average return they expect to earn from their investments. However, the order in which those returns occur can be just as important. This is known as sequencing risk, or sequence-of-returns risk.
Sequencing risk is the danger that poor investment returns occur at the wrong time, particularly just before or soon after a person retires. This period can be especially important because retirement savings are often near their highest level and the retiree has started withdrawing money to meet living expenses.
