If you are an experienced investor or even if you tend to just dabble in investments, the term sequence, otherwise known as return risk, is likely on your radar. As an investment advisor and financial planner in the Chicago area, P.A. Berg Retirement Solutions knows a thing or two about the sequence or risk-return — and our team is here to help you, as someone investing in their financial future, to understand and act upon the sequence of return risk.

In today’s blog, we are going to discuss the basic principles of the sequence of return risk, and the implications that it can on your financial future. But before we get into the information, there is one thing that we want you to remember: It is not how you lose the money, it is when you lose the money that matters most.

What Is Sequence Risk?

Sequence risk is the principle of how your withdrawals from funds will affect the fund’s underlying investments. What makes the sequence or return risk so important is the idea that while the market can crash at the time or your retirement, it is how and when you managed your assets that will determine the comfort of your retirement.

Sequence Risk — The Breakdown

Sequence risk is rather simple as a concept but can vary in degree of importance depending on each person’s unique financial situation. To put it in the most simple and general terms, however, sequence risk is when an investor receives lower returns or negative returns as a result of the withdrawal that they have made from their investment funds in the past. As an investment advisor, we cannot stress enough the importance of timing in investments — and sequence return risk is a testament to that.

Depending on the timing of someone’s retirement investing financial outcomes can be entirely different for individuals — even if they invested comparable amounts at different times. The state of the market at the time of the investment or withdrawal is not so much in control of the investor, as bear markets and bull markets fluctuate, but there are things that you can do as an investor to minimize your risks.

Protecting Against Sequence Risk

As an investor, it is important that you understand that you have a number of options for protecting yourself from sequence risk. The best way to learn about these options is to visit an investment advisor from P.A. Berg Retirement Solutions, but among the most common ways to protect yourself are to continue to make a contribution to the funds to offset losses and to diversify your portfolio away from higher risk stocks.

Why Does Any Of This Matter?

When you think of retirement do you think of living comfortably on a predetermined retirement income? Or do you think of barely scraping by? At P.A. Berg Retirement Solutions it is our goal to help you to plan for the most secure financial future as possible — and that is exactly why we have brought up the sequence of return risk.

The sequence of returns can significantly affect the impact of what capital will be available to you in retirement, and in order to make sure that you are secure, regardless of the current economy and market trends, it is important for you to discuss your investment strategies with an investment advisor from P.A. Berg Retirement Solutions. Below, we have provided you with a quick example as to why sequence returns matter, and how sequences of returns are more affected by the actions that you take rather than the market’s fluctuations

Let P.A. Berg Retirement Solutions Help You

When it comes to managing your sequence return risks there are a great number of considerations that need to be made. The status of the market when you enter retirement, the rate of portfolio losses that you are experiencing, and how and when you make withdrawals from your funds can make a huge impact on your financial situation. Let a financial planning and retirement planning professional from P.A.Berg Retirement solutions help you to minimize your risks and plan for your financial future.

If you are interested in scheduling a meeting with one of our registered investment advisors, we urge you to contact us today and to request a free evaluation!

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