The Hidden Challenge for Retirees
00:00:00.000 | A sequence of return risk means that if you are a retiree
00:00:03.600 | and you are taking money out of your portfolio,
00:00:06.320 | you face some different challenges
00:00:09.120 | from say a buy and hold investor.
00:00:11.520 | So imagine you're a buy and hold investor.
00:00:13.680 | It doesn't really matter how the market performed
00:00:16.840 | along the way.
00:00:17.680 | The only thing that matters is your average return
00:00:20.240 | over those 30 years.
00:00:21.560 | So that determines uniquely what the final outcome would be.
00:00:25.840 | Imagine you had something like a 10% average return
00:00:28.800 | between now and the end point.
00:00:30.680 | And it doesn't matter if you had poor returns first
00:00:33.320 | and then very good returns later on or vice versa.
00:00:36.760 | That's true for buy and hold investors,
00:00:39.480 | but it's not so much true for people
00:00:41.760 | who are putting money into their portfolios.
00:00:43.360 | It's actually the flip side of this.
00:00:44.720 | It turns out that for retirees,
00:00:47.400 | it's not so much important what the average return is
00:00:51.240 | over your 30 year retirement horizon.