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Risks · 4 min read
How does sequence-of-returns risk affect FIRE?
Same average return, very different outcomes. It's all about when the bad years come.
First 5 yrs
after FIRE are the riskiest for your plan
Why order matters
While you're investing, a crash is a sale: you buy cheap. After FIRE, you're selling to live. Selling during a crash locks in losses, and those rupees never recover.
Two retirees, same 9% average
A: crash in year 1, boom later → money runs out in their 70s
B: boom first, crash later → money lasts past 90
How to defend against it
- ●Keep 2–3 years of expenses in debt/cash (a 'bucket') so you don't sell equity in a crash.
- ●Use a lower withdrawal rate, or cut spending 10–20% in bad years.
- ●Keep a little income (Barista FIRE) for the first few years.
- ●Work one or two extra years if markets are frothy when you plan to quit.
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Estimates, not guarantees. Projections assume steady average returns and inflation; real markets are bumpy, and returns are not guaranteed. This is an educational tool, not investment, tax or financial advice. See our methodology, assumptions & limitations · Last updated 25 October 2026.