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Sequence-of-returns risk & the historical stress test

The order of returns matters, not just the average. A crash early in retirement is far more dangerous than the same crash later — the stress test replays real history to show it.

Two retirements can earn the same average return and end very differently, purely because of the order the returns arrive in. A big loss in the first few years — while your balance is largest and you're withdrawing — does lasting damage, because you sell assets while they're down and they're not there to recover. The same loss late in retirement barely matters. This is sequence-of-returns risk.

The historical stress test

The planner's stress test replays your plan against every major downturn of the last century — 1929, the 1970s stagflation, the GFC, and more — retiring you *straight into* each one. Instead of random returns, it uses the actual sequence of returns that followed, so crashes and their recoveries land exactly as they did in history. You get a survival scorecard: how many eras your plan lives through.

The key control is fixed vs flexible spending. A plan can survive far more eras when you're willing to trim after a crash — the test shows exactly how many, at each level of belt-tightening.

Try it — worked examples

Related concepts

See it in your own plan

Model your super, the Age Pension and how long your money lasts — free, in today's dollars.

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