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Question 19

Sequence-of-returns risk matters most to retirees who take withdrawals from a portfolio. Two people may earn the same average return over a period, but the one who experiences large negative returns early while withdrawing income can deplete their balance much faster than someone who sees those losses later. This risk shows why withdrawal timing, portfolio glidepaths, and safe withdrawal rules are important in retirement planning.

What best describes sequence-of-returns risk?

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By Wise Wallet

An emergency fund covering several months of expenses helps you avoid high-interest debt when income or expenses suddenly change.