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The basics
A +20% year followed by a −20% year is not the same as a smooth average, especially while money is leaving the portfolio. Early losses can force more shares to be sold and leave less capital for a recovery.
Illustrative numbers
Same average, different retirement path
Path Aloss early, gain later
Path Bgain early, loss later
Withdrawalssame dollars each year
Path A can end lower because withdrawals after the early loss remove a larger share of the remaining portfolio. Reversing returns can change the result even when the arithmetic average is unchanged.
Calculation transparency
How it works in MoneyWhatIf
- 01
Nonhistorical mode uses each plan year’s configured return, whether flat or custom. Historical mode instead uses the selected series’ actual calendar-year return wherever coverage exists, then falls back to that year’s configured return. Some available series include reinvested dividends and some are price-only.
- 02
Every return path runs through the full annual engine, so taxes, withdrawals, sales, and balances respond to the changed sequence.
- 03
Contributions, withdrawals, required distributions and sweeps are dated mid-year, so each earns or forgoes half a year of that year’s return before the closing balance is published — and that balance is what later years’ returns act on.
- 04
Plan Resilience repeats the exercise across many block-resampled historical sequences rather than presenting one path as a probability.
Keep in mind
Model limits
Historical sequences are examples, not forecasts; the future can fall outside observed history.
The model applies annual returns and cannot represent intra-year selling or volatility.
One historical path reveals sensitivity, not the likelihood of success. Use the repeated resilience view for a broader stress test.
This explanation documents the planning model. It is educational, not individualized tax, legal, Medicare, or investment advice.
Where it appears
Where to use it
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The words behind it
Related financial terms
Plain-English definitions, with 2026 figures and worked examples, from the financial terms glossary.