Posted on April 28th, 2026

Average returns fail to account for the specific timing of market drops which can deplete your savings faster than you expect.

Relying on a 7% or 8% average figure masks the volatility that forces you to sell assets when prices are low to cover your monthly living expenses.

Retirement Plan Solver examines the mechanics of sequence risk and explains how you can build a portfolio that survives market downturns without running dry.

The Difference Between Average and Actual Growth

Investors often look at a twenty-year average and assume their money grew in a straight line. You might see a fund with a 10% average annual return, but your actual balance depends on the path that money took. If the market drops 20% one year and gains 30% the next, your average is positive while your actual dollar amount might still lag behind. We see many retirees plan their futures based on these static numbers without accounting for the math of recovery.

Actual growth requires you to look at the geometric mean rather than the simple arithmetic average. When your portfolio loses 50% of its value, you need a 100% gain just to return to your original starting point. These swings create a gap between what the brochures promise and what you can safely spend. We focus on the dollar-weighted return because that reflects the money you actually have available for bills and travel.

Consider these two scenarios for a $500,000 portfolio over three years:

1. Year one sees a 10% gain, year two stays flat, and year three gains 10%.
2. Year one loses 20%, year two gains 25%, and year three gains 15%.

Both scenarios might look similar on a long-term chart, but the second one forces you to work much harder to regain lost ground. This discrepancy is why we prioritize consistency over chasing the highest possible average. Protecting your principal during down years matters more than catching every bit of a bull market surge.

Why Sequence of Returns Matters More Than Averages

The order of your returns determines the longevity of your nest egg once you start taking distributions. If the market crashes in your first three years of retirement, you are selling shares at a discount to create your paycheck. This permanent loss of capital means you have fewer shares left to participate in the eventual recovery. We call this sequence of returns risk, and it is the primary reason why two people with the same average return end up with vastly different bank balances.

Retirees who experience a bull market in their first decade can withstand almost any later volatility. Their early gains create a buffer that supports their spending even when the market eventually corrects. Conversely, those who hit a bear market early often find their portfolios spiraling toward zero. You cannot control when the market drops, but you can control how your portfolio reacts to those specific timings.

The math of retirement changes the moment you stop adding money and start taking it out, making the timing of losses your biggest financial threat.

We help clients understand that a 5% average with low volatility is often safer than a 10% average with wild swings. High volatility forces you to liquidate more of your portfolio during the bad times. By the time the market bounces back, you may not have enough shares remaining to benefit from the upswing. We build strategies that aim to smooth out these cycles to keep your income steady.

Three Factors That Drain Your Savings During Volatility

Withdrawals act as a secondary tax on your portfolio when the market is down. When you take $4,000 a month from a declining account, you are effectively locking in those losses forever. This creates a compounding effect in reverse where your remaining balance has to work twice as hard to support you. We look at three specific factors that accelerate this drain during your retirement years.

1. The necessity of monthly distributions regardless of current share prices.
2. The impact of inflation on your purchasing power during stagnant market years.
3. The psychological pressure to sell everything when balances drop quickly.

Inflation compounds the problem because your expenses rise even when your portfolio value falls. You might need to withdraw more money just to maintain your standard of living while your investments are struggling. This double hit can shorten the lifespan of a portfolio by several years if you do not have a protective buffer in place. We suggest keeping a portion of your assets in liquid, stable accounts to avoid selling equities during a crash.

Emotional decisions during a downturn often cause more damage than the market itself. Many investors wait until the bottom to move to cash, missing the inevitable recovery that follows. This behavior turns a temporary paper loss into a permanent financial disaster. Our approach at Retirement Plan Solver focuses on creating a plan you can stick with through every phase of the economic cycle.

Protect Your Savings With Retirement Plan Solver

Use the Retirement Plan Solver to create a strategy that protects your savings from market volatility and unpredictable returns.

Stop guessing how long your money will last and start using a plan built for your specific needs.

Our team understands the Waco market and the unique challenges facing retirees today.

Get the clarity you need to enjoy your retirement without worrying about the next market shift.