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Sequence of returns risk explained

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4 months ago

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Ciara Houghton | Moment | Getty Images

If you’re within a decade of retirement, the current stock market volatility may be a good reminder of a key risk that lies ahead for your nest egg.

While stocks tend to offer the best opportunity for long-term growth despite their ups and downs, a persisting market downturn heading into retirement can be problematic if you’ll need to tap those assets when prices are down. That can permanently reduce how long your portfolio will last, said certified financial planner Mike Casey, founder and president of AE Advisors in Alexandria, Virginia.

This happens “by forcing investors to sell depressed assets and reducing the capital base available for recovery,” Casey said.

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This problem is known as “sequence of returns” risk, which essentially means that the order, or sequence, of your gains or losses over time matters when you liquidate your investments.

“The best way to handle sequence of returns risk is to put a plan in place before someone retires,” said CFP André Small, founder of A Small Investment in Houston. “I typically encourage clients to start planning for sequence risk at least three to five years before retirement.”

Market volatility likely to continue amid uncertainty

Since the Feb. 28 start of the war in Iran, the major stock indexes have zigzagged on a downward trajectory amid high oil prices, fears of inflation and uncertainty about when the conflict in the Middle East will end. Year to date through Thursday, the Standard & Poor’s 500 index — a broad measure of how U.S. companies are faring — was down about 4%. The Dow Jones Industrial Average closed down 3.1% for the year, and the tech-heavy Nasdaq Composite Index has dropped roughly 7%.

However, last year, the S&P jumped more than 17%, the Dow gained about 13% and the Nasdaq was up 19.8%. While it’s impossible to predict where the stock market will go from here, volatility is expected.

For long-term savers — those whose retirement is many years or decades away — the ups and downs of the stock market generally matter less because their portfolios have time to recover before being relied on for income. For those investors, “the sequence of returns risk … isn’t such a big deal,” said CFP Frank Maltais, a financial advisor for Fidelity Investments in Portland, Maine.

If you retire into a poor market, that can diminish your nest egg over time.

Frank Maltais

Financial advisor for Fidelity Investments

For new retirees, though, it can make a big difference, Maltais said.

“If you retire into a poor market, that can diminish your nest egg over time, especially if you don’t scale down your withdrawals during that declining market,” Maltais said. “On the other hand, if you have a strong market early in retirement, that can really put the wind at your back.”

For illustration, according to a recent report from Fidelity: If a retiree starts with a balance of $1 million and withdraws $50,000 each year, and there’s a sequence of positive returns early in retirement followed by a bear market later on, the portfolio will have a balance of more than $3 million after 30 years. On the other hand, if there are negative returns early in retirement, followed by a bull market, the portfolio would be depleted in 27 years.

Your rate of withdrawal matters

The rate of withdrawal is a key component of the sequencing risk, Maltais said.

He used the early 1970s as an example: If a 65-year-old retired around 1972, right ahead of them was the 1973-1974 bear market, when the S&P dropped 48%. “That was a time when you had really high inflation, we had an oil crisis and we had a lot of political instability,” Maltais said.

“Investors who had a balanced portfolio that had different asset classes — stocks, bonds, cash — and were drawing 4%, they might have seen that portfolio last,” he said.

But someone who had to withdraw more risked running out — and the higher the rate of withdrawal, the earlier the age that the portfolio would have been depleted, he said.

Be sure to anticipate your retirement spending

It’s also important to have a good handle on what your expenses in retirement will be, advisors say, as well as your sources of income — i.e., Social Security, pension, annuities, part-time work. This helps to determine how much of your portfolio you’ll need to use in any given year.

“Understanding spending needs is the most important item to begin mitigating this [sequencing] risk, rather than starting with portfolio allocation,” said CFP Matthew McKay, director of investments for Briaud Financial Advisors in College Station, Texas.

“The reason we start there is to understand, what level of cushion do we need to build into the [asset] allocation,” McKay said.

How to keep your money safe amid this economic and political uncertainty

“Once we have that number, we build a base of income-oriented assets, meant to be used for those early years of spending, to ensure that we have time to see markets move and perhaps recover if there’s a decline, without needing to sell into weakness,” he said.

Maltais said that the rate of withdrawal can influence how much of a portfolio should be in stocks. For example, someone who has enough other sources of income may only expect to need 1% of their portfolio yearly. That investor may afford to be more aggressive in their investing, he said, compared with someone who expects to need 6%.

One way to plan against the risk is to have a solid emergency fund, Maltais said.

“Try to have one to two years of expenses in cash,” he said. “That way if there is an unexpected downturn, [retirees] don’t necessarily have to sell their portfolio down as much if an unexpected expense happens.”

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$20,000 Caution Bond Requirement for US Visa Applications imposed on 50 Countries

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6 days ago

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August 8, 2026

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The United States Department of State has officially implemented a revised visa policy introducing a mandatory posting requirement for caution payments of up to $20,000 on select foreign travel applications. Under the updated regulatory framework, consular officials are authorized to require temporary nonimmigrant visa applicants from targeted foreign countries to post a refundable financial bond of $20,000 as a condition for visa issuance. The policy mechanism is designed to address diplomatic concerns regarding high overstay rates among temporary visitor, business, and educational visa categories.

The caution bond pilot program applies selectively to foreign nationals from designated countries whose diplomatic entities record historical visa overstay rates exceeding established federal thresholds. Under administrative guidelines published by the State Department, the full financial deposit is posted directly to a dedicated federal escrow account prior to final visa issuance. The entire caution payment is automatically refunded to the applicant upon verified proof of timely departure from the United States in strict compliance with the authorized duration of stay. Conversely, failure to depart within the legal timeframe results in full forfeiture of the posted financial bond to the United States government.

Diplomatic representatives and travel policy experts have expressed varying perspectives regarding the operational implementation of the caution bond system. Administration officials emphasize that the measure serves as an effective, market-based incentive to enforce international travel compliance and preserve domestic immigration security standards. However, international trade organizations and foreign diplomatic missions have raised concerns regarding the financial burden imposed on legitimate business travelers, foreign students, and commercial partners from developing nations.

The United States finalized the rule to make the temporary visa bond program permanent, taking effect on August 3, 2026. The updated permanent regulation replaces the prior 12-month pilot, eliminates the lowest $5,000 tier, and raises the maximum required bond amount to $20,000 for specific B-1/B-2 business and tourist visa applicants.

Here is the list of the 50 countries on the list as o August 3, 2026

African Nations (31 Countries)

  • Algeria
  • Angola
  • Benin
  • Botswana
  • Burundi
  • Cabo Verde (Cape Verde)
  • Central African Republic
  • Côte d’Ivoire (Ivory Coast)
  • Djibouti
  • Ethiopia
  • Gabon
  • The Gambia
  • Ghana
  • Guinea
  • Guinea-Bissau
  • Lesotho
  • Malawi
  • Mauritania
  • Mauritius
  • Mozambique
  • Namibia
  • Nigeria
  • São Tomé and Príncipe
  • Senegal
  • Seychelles
  • Tanzania
  • Togo
  • Tunisia
  • Uganda
  • Zambia
  • Zimbabwe

Asian & Eastern European Nations (11 Countries)

  • Bangladesh
  • Bhutan
  • Cambodia
  • Georgia
  • Kyrgyzstan
  • Mongolia
  • Nepal
  • Papua New Guinea
  • Tajikistan
  • Turkmenistan
  • Uzbekistan

Caribbean & Latin American Nations (5 Countries)

  • Antigua and Barbuda
  • Cuba
  • Dominica
  • Grenada
  • Venezuela

Oceanian Nations (3 Countries)

  • Fiji
  • Tonga
  • Vanuatu

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Personal Finance

Next-Generation Retirement Planning: Managing Longevity Risk and Variable Income Streams

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1 week ago

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August 7, 2026

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Retirement planning strategies are evolving in 2026 to address increased life expectancies, shifting dynamic market conditions, and the transition away from traditional defined-benefit pensions. Individual investors and financial advisors are abandoning rigid retirement models in favor of flexible, multi-asset strategies designed to mitigate longevity risk and preserve purchasing power over multi-decade retirement horizons.

Mitigating Longevity Risk with Dynamic Asset Allocation
As average life expectancies extend past eighty-five years, one of the primary financial risks facing retirees is outliving their accumulated wealth. Traditional fixed income allocations—such as the standard 60/40 equity-to-bond portfolio—are being reevaluated to ensure portfolios generate sufficient capital growth alongside reliable income.

Financial planners recommend maintaining a meaningful equity allocation throughout retirement to offset long-term inflation erosion. High-dividend equity funds, global real estate investment trusts (REITs), and inflation-indexed Treasuries are combined to create diversified portfolios that deliver both growth and income stability.

The Transition to Dynamic Withdrawal Strategies
The classic “4% safe withdrawal rule” is increasingly replaced by dynamic withdrawal strategies that adapt annually based on market performance. Under a dynamic withdrawal framework, retirees adjust their annual distribution rates within pre-set caps and floors:
– Market Upside: During strong market returns, retirees can increase discretionary spending or fund family legacy gifts.
– Market Downturns: During market pullbacks, spending distributions are temporarily reduced to prevent sequence-of-returns risk and preserve core investment principal.

Guaranteed Lifetime Income Options and Deferred Annuities
To establish a guaranteed baseline for essential living expenses, individuals are incorporating modern fixed-indexed and deferred longevity annuities into their broader retirement architectures. Modern annuity structures offer competitive return caps, transparent fee schedules, and inflation-adjustment options.

By funding essential expenses—such as housing, healthcare, and insurance—with guaranteed income streams from Social Security, pensions, and annuities, retirees can manage discretionary investment portfolios with greater flexibility and lower emotional stress during market volatility.

Actionable Steps for Future Retirees
1. Calculate Baseline Retirement Expenses: Determine fixed living costs and map guaranteed income sources to cover essential expenditures.
2. Adopt Flexible Withdrawal Rules: Implement dynamic spending rules to protect investment principal against market downturns.
3. Incorporate Inflation-Protected Assets: Maintain exposure to dividend-growing equities and inflation-indexed bonds to safeguard long-term purchasing power.

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Building Generational Wealth: Family Governance, Estate Tax Optimization, and Asset Protection

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2 weeks ago

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August 1, 2026

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As the largest intergenerational transfer of wealth in history accelerates, high-net-worth families, entrepreneurs, and individual investors are placing heightened emphasis on comprehensive estate planning, family governance, and asset protection. Preserving capital across generations requires a balanced approach combining tax-efficient legal structures with open family communication and financial literacy education.

Optimizing Estate Tax Exemptions and Trust Structures
With potential modifications to federal estate tax exemption thresholds on the horizon, proactive estate planning is essential for high-net-worth households. Estate planning attorneys and wealth advisors are establishing multi-generational trust structures to transfer wealth efficiently while minimizing estate and gift tax exposure.

Popular structural strategies include:
– Irrevocable Life Insurance Trusts (ILITs): Utilizing life insurance proceeds to provide liquidity for estate tax obligations without expanding the taxable estate.
– Grantor Retained Annuity Trusts (GRATs): Transferring rapidly appreciating assets to beneficiaries with minimal gift tax consequences.
– Dynasty Trusts: Preserving wealth across multiple generations while providing long-term asset protection from creditor claims and legal liabilities.

Establishing Family Governance and Financial Education
Legal and financial structures alone cannot guarantee long-term wealth preservation without effective family governance. Financial advisors report that a significant percentage of multi-generational wealth dissipation stems from lack of communication and inadequate financial preparation among heir generations.

Families are establishing formal family governance frameworks, including periodic family meetings, written mission statements, and structured philanthropic foundations. Involving younger family members in charitable grant-making and investment discussions fosters financial stewardship and prepares heirs to manage family assets responsibly.

Digital Asset Custody and Legacy Planning
In today’s modern economy, estate planning must extend beyond physical real estate and traditional brokerage accounts to encompass digital assets. Comprehensive estate plans now include detailed inventories and legal access protocols for corporate domain names, intellectual property, digital media rights, and cryptocurrency holdings.

Fiduciaries and estate executors should be provided with secure, encrypted access mechanisms and clear legal authority to manage and transfer digital holdings in accordance with the owner’s estate directions.

Practical Steps for Legacy Planning
1. Review and Update Estate Documents: Ensure wills, revocable trusts, and power-of-attorney designations accurately reflect current family structures.
2. Establish Structured Trusts: Utilize irrevocable trusts to protect assets from creditors and minimize future estate tax liabilities.
3. Create a Digital Estate Inventory: Document access protocols and legal permissions for all online accounts, intellectual property, and digital assets.

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