Kiplinger

Is Your Retirement Income in Peril of This Risk?

As 2007 drew to a close, many Americans eagerly anticipated their upcoming retirement dates. After all, roughly 10,000 Baby Boomers retire daily. But by the end of 2008, many of the people who did decide to retire that year probably wished they hadn't.

The S&P 500 fell 37% over the course of the year, significantly eroding their retirement savings and digging them into a hole that would be tough to climb out of.

This experience illustrates the perils of sequence of returns risk, which occurs when the market's returns at a specific time are unfavorable, even if that volatility averages out into favorable returns during the long term.

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