Imran Razvi
Founder, Retire Well Financial Group
Imagine retiring on January 1st with $1,000,000 — the result of 35 years of disciplined saving. You have done everything right. You start withdrawing $5,000 a month to cover your living expenses. Then, three months later, the market begins to fall.
This is not a hypothetical. It has happened to real retirees — in 2000, in 2007, in 2022. And when it does, the combination of a falling market and ongoing withdrawals creates a compounding destruction that most retirees never see coming. It is called sequence of returns risk — and it is the single most dangerous threat to a retirement portfolio.
To understand why, we need to look at the history of bear markets, the mathematics of withdrawal during a decline, and the strategies that protect against it.
14
Bear markets since 1906
Defined as ≥20% decline from peak
~7 yrs
Average time between bear markets
One is always coming — the question is when
−57%
Worst modern bear market
S&P 500 peak-to-trough, 2007–2009
Every bear market of the last 100 years
A bear market is defined as a decline of 20% or more from a recent peak. Since 1906, the U.S. stock market has experienced 14 of them — roughly one every seven years. Every single one felt unprecedented to the people living through it. Every single one eventually ended.
Panic of 1907
Bank runs, trust company failures
Great Depression
Credit collapse, bank failures, Smoot-Hawley tariffs
Roosevelt Recession
Premature fiscal tightening, Fed tightening
Post-WWII Contraction
Post-war demobilization, inflation fears
Kennedy Slide
Overvaluation, Cuban Missile Crisis fears
Vietnam-Era Bear
Inflation, Vietnam War spending, Fed tightening
Oil Crisis Bear
OPEC oil embargo, stagflation, Watergate
Volcker Recession
Fed rate hikes to crush inflation (prime rate hit 21%)
Black Monday
Program trading, portfolio insurance cascade
Gulf War Recession
Iraq invasion of Kuwait, oil price spike, S&L crisis
Dot-Com Bust
Tech bubble collapse, 9/11, accounting scandals
Global Financial Crisis
Mortgage-backed securities collapse, bank failures
COVID Crash
Global pandemic, economic shutdown
Rate Hike Bear
Fed rate hikes, inflation surge, Ukraine war
Notice two things. First, the declines are severe — the average bear market in this table fell roughly 38%. Second, the recoveries take time — often years. During that entire recovery period, a retiree who is withdrawing is selling shares at depressed prices, permanently reducing the number of shares available to benefit from the eventual rebound.
"A bear market during accumulation is painful. A bear market in the first years of retirement — while you are withdrawing — can be permanently devastating. The math is brutally different."
— Imran Razvi
The withdrawal scenario: $1M portfolio, 2-year bear market
Let us run the numbers on a specific scenario — one that mirrors what happened to thousands of retirees who retired in late 2007 or early 2000.
Scenario Assumptions
Starting portfolio: $1,000,000
Monthly withdrawal: $5,000 / month ($60K/year)
Bear market decline: −30% over 24 months
Post-bear flat period: 6 months (market stagnant)
Recovery period: +15% over 12 months
Comparison: Same portfolio with zero withdrawals
Day 1 — Retirement begins
Both portfolios start equal
Month 6 — Market down ~8%
$30K withdrawn; gap opens
Month 12 — Market down ~16%
$60K withdrawn; gap widens to $60K
Month 18 — Market down ~23%
$90K withdrawn; gap now $90K
Month 24 — Bear market ends (−30%)
$120K withdrawn; portfolio 17% smaller than no-withdrawal
Month 30 — Flat market, still withdrawing
No recovery yet; withdrawals continue to erode
Month 42 — Full recovery (+15%)
Market recovered — but withdrawal portfolio is still 29% behind
The permanent damage: $215,992 gap after full recovery
After 42 months — including a full market recovery of +15% — the withdrawal portfolio is worth $608,708 versus $824,700 for the no-withdrawal portfolio. That is a $215,992 permanent gap — even though the market fully recovered. The withdrawals during the decline sold shares at depressed prices that never came back. This is sequence of returns risk in action.
Why withdrawals during a decline are so destructive
During accumulation, a bear market is painful but recoverable. You are not selling — you are buying. Lower prices mean your contributions purchase more shares. When the market recovers, you benefit from every share you accumulated at the bottom.
In retirement, the math reverses completely. When the market falls 30% and you need $5,000 this month, you must sell shares — at 30% below their value. Those shares are gone. When the market recovers, you do not benefit from them. You have permanently sold a piece of your future recovery.
Worse, each withdrawal leaves a smaller base to recover from. A $700,000 portfolio needs to gain 43% to return to $1,000,000. A $600,000 portfolio needs to gain 67%. The math becomes increasingly punishing with each forced sale.
This is why the sequence of returns matters so much in retirement — not just the average return. Two retirees with identical 20-year average returns can have dramatically different outcomes depending on whether the bad years came early or late. Early bad years, combined with withdrawals, can permanently cripple a portfolio that would have been fine with a different sequence.
"Every share you sell during a bear market is a share that will never participate in the recovery. In retirement, forced selling is a one-way door."
— Imran Razvi
Four strategies that protect against sequence risk
The good news: sequence of returns risk is entirely manageable with the right plan. None of these strategies require predicting when the next bear market will arrive. They simply ensure that when it does — and it will — you are not forced to sell.
The Bucket Strategy
Separate your retirement assets into three buckets: 1–2 years of expenses in cash (Bucket 1), 3–7 years in bonds and stable assets (Bucket 2), and long-term growth in equities (Bucket 3). During a bear market, you draw from Bucket 1 — never touching the equity portfolio. This eliminates forced selling at depressed prices.
Guaranteed Income Floor
Maximize Social Security (delay to 70 for an 8%/year increase), optimize any pension, and consider a SPIA or fixed annuity to cover essential expenses. If your guaranteed income covers your necessities, your portfolio withdrawals become discretionary — you can pause or reduce them during a bear market.
Dynamic Withdrawal Strategy
Rather than a fixed $5,000/month regardless of market conditions, a dynamic strategy adjusts withdrawals based on portfolio performance. In a down year, you reduce discretionary spending by 10–15%. This simple flexibility can dramatically extend portfolio longevity through a sustained downturn.
Sequence Risk Buffer
In the 5 years before retirement, gradually shift a portion of your portfolio into stable assets — building a 2–3 year cash/bond buffer. This means you enter retirement with the ability to weather an immediate bear market without selling a single share of stock.
The bear market will come. The question is whether you are ready.
In the last 100 years, the U.S. has experienced 14 bear markets — roughly one every seven years. The average retiree will live through 3 to 5 of them. The ones who emerge financially intact are not the ones who predicted the crash. They are the ones who built a plan that did not require selling during one.
A guaranteed income floor. A bucket strategy. A dynamic withdrawal plan. A fiduciary advisor who holds the plan steady when fear says to sell. These are not complicated ideas. But they require deliberate construction before the bear market arrives — not after.
It is well with my soul — and a large part of that peace comes from knowing that when the next bear market arrives, your retirement does not depend on what the market does next month.
Imran Razvi
Founder & Lead Advisor, Retire Well Financial Group
Imran specializes in building retirement income plans that protect against sequence of returns risk — so his clients can stay invested through any bear market without fear of running out of money.