Bear-market stress test

What this is

What if markets crash the year you retire?

Sequence-of-returns risk is the cruelest math in retirement: the same average return produces very different outcomes depending on WHEN the bad years hit. A 35% crash in year 1 of retirement can permanently shrink your income by 30%.

• ·Historic max drawdowns: TSX −50% (2008-09), S&P 500 −50% (2008-09), 60/40 portfolio −30%.
• ·Recovery without withdrawals: typically 3-5 years to break even on a 35% drop.
• ·Recovery WITH withdrawals: can take much longer or never recover if you keep selling into the crash.
• ·Mitigation: 2-3 year cash buffer + defer CPP + bucket strategy. Reduces sequence risk by ~60%.