"Sequence-of-returns risk is the danger that a major market decline in the years just before or just after retirement permanently damages your portfolio, even if markets eventually recover. A 40% drawdown at age 58 is far more damaging than the same drawdown at age 40, because you have less time to recover and may begin withdrawals before prices rebound."
"The VIX, Wall Street's primary fear gauge, sits at 31.05 as of March 27, 2026, which places it in the 96.5th percentile of the past year. That is well above the 20 to 30 range considered elevated uncertainty. The VIX has risen 73% in the past month alone, signaling genuine stress in equity markets."
"Moving too aggressively into bonds too early creates its own problem: inflation erosion. A portfolio parked entirely in fixed income for a decade will lose purchasing power in a persistent inflation environment. The goal is managing which risks you carry and when."
Investors approaching retirement face the challenge of balancing equity and bond allocations. Sequence-of-returns risk poses a significant threat, especially with market volatility indicated by a high VIX. A major market decline close to retirement can severely impact portfolios. However, moving too quickly into bonds can lead to inflation erosion. Investors must carefully manage risks while considering their growth potential over the next decade, weighing options for gradual shifts in asset allocation to protect their accumulated wealth.
Read at 24/7 Wall St.
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