What happens if the market crashes right after I retire?
It is the single most dangerous moment in a retirement plan — two people with identical average returns can end up in opposite places depending on whether the bad years came first.
The mechanism is withdrawals. Selling a fixed real amount from a falling portfolio removes shares permanently, so the recovery has less capital to work on. Average returns cannot capture this, because the order of returns is exactly what an average discards.
This is why the first decade of retirement deserves attention the later ones do not. The usual defences are holding a couple of years of spending in cash or short bonds so you are not forced to sell into a fall, and being willing to trim discretionary spending after a bad year — a rule that adjusts can start higher than one that cannot.
It is also why a plan should be stress-tested against actual historical sequences rather than a single average. The sequence-risk explorer on this site runs your own numbers through the worst starting years on record.
When the answer is different
- Guaranteed income changes the picture substantially. If Social Security and a pension cover the essentials, a fall only affects discretionary spending, and forced selling largely disappears.
- The same risk runs in reverse for someone still accumulating: a fall early in a saving career, with contributions still going in, is helpful rather than harmful.
Put your own numbers to it
Every answer here is general. These are not.
- Sequence risk explorer
What if I retire into a bad decade?
- Monte Carlo projection
What is the range of outcomes, not just the average?
- Retirement number
How much do I need, and am I on track?
The research this rests on
Each note states its claim, rates how strong the evidence actually is, and lists the conditions under which it fails.
- The order of returns decides retirements that averages cannot explain
Two retirees experiencing identical average returns can face opposite outcomes depending on when the bad years arrive. (strong)
- The 4% rule is a historical result with three heavy assumptions
A 4% initial withdrawal, inflation-adjusted, survived every historical 30-year US retirement — under assumptions that may not hold for you. (moderate)
- A withdrawal rule that adjusts can start higher than one that cannot
Allowing withdrawals to respond to portfolio performance supports a materially higher initial withdrawal rate than a rule that raises spending with inflation regardless of what the portfolio does. (moderate)
- Losses hurt about twice as much as equivalent gains feel good
People weight losses substantially more heavily than equal-sized gains, which systematically distorts investment decisions. (strong)