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Sequence-of-returns risk

German: Sequenzrisiko

The risk that poor returns early in a withdrawal phase permanently weaken a portfolio.

If you withdraw regularly, a crash early on forces you to sell shares at low prices – shares then missing for the recovery. Remedies include a cash buffer, a more conservative allocation around retirement and flexible withdrawals. William Bengen’s 4% rule (1994) describes a historically sustainable starting withdrawal rate over 30 years.