TY - JOUR T1 - Sequence Risk: Is It Really a Big Deal? JF - The Journal of Investing DO - 10.3905/joi.2021.1.193 SP - joi.2021.1.193 AU - Javier Estrada Y1 - 2021/08/10 UR - https://pm-research.com/content/early/2021/08/10/joi.2021.1.193.abstract N2 - Financial planners are keenly aware of, and routinely warn clients about, sequence risk; that is, the possibility of facing a sequence of low returns early in retirement that may force retirees to scale down significantly the plans they had made. This really is a scary scenario, but one that the evidence here shows that retirees are not very likely to encounter. A new and refined definition of sequence risk is advanced in this article, linking this type of risk to the sustainability of a withdrawal strategy. Furthermore, three ways of assessing sequence risk are proposed, among them one that enables a retiree to monitor the sustainability of his withdrawal strategy periodically and to introduce adjustments when necessary. The ultimate message of this article is that retirees should be informed, but not obsess, about sequence risk.TOPICS: Retirement, risk management, portfolio management/multi-asset allocationKey Findings▪ Sequence risk, or the possibility of facing a sequence of low returns early in retirement that forces retirees to scale down their plans significantly, is a scary scenario.▪ The evidence suggests that, however scary it might be, sequence risk is not very likely to hit retirees, who should certainly be informed, but not obsess about, this type of risk.▪ Three ways of assessing sequence risk are proposed here, among them one that enables retirees to monitor the sustainability of a withdrawal strategy periodically and to introduce adjustments when necessary. ER -