Wade Pfau published this chart to illustrate the basic "shape" of Sequence of Real Returns Risk over time:
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Here is a sort of stylized version you might see in typical financial planning literature:
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There is more of a discontinuity in Pfau's chart than the stylized one, and that really depends on exactly what you imagine happening at retirement. But basically, there are "tails" extending well before and well after retirement, but the main part of the distribution is from around 10 years before to around 10 years after, and more than 20 years before or 20 years after, you are way out in the tails.
The fact SORRR starts building up in advance of retirement is basically why Target funds and such initiate a "glidepath" starting in advance of anticipated retirement. The fact it diminishes after retirement explains why "bond tents" and fixed-length TIPS ladders and such are popular in certain circles. It is interesting to ask why Target funds don't do that, and I think the basic answer is a combination of what is actually marketable versus the admittedly limited harm to being overly conservative at advanced ages, particularly since for many households actual desired spending starts converging toward Social Security.
When you have multiple SS payments anticipated starting at different times, you can just figure out how to roughly bridge things so you start out with what will be the maximum amount of SS in the future, and have the bridge get to zero by that point. If you want you can also try to figure out how to step it down at the point the first SS payments would kick in. I note, though, that in the spirit of not being overly precise, if you use laddered ETFs this can be done just by frontloading a bit such that the average duration is lower than it would be if that first payment would never kick in.
Here is a sort of stylized version you might see in typical financial planning literature:
There is more of a discontinuity in Pfau's chart than the stylized one, and that really depends on exactly what you imagine happening at retirement. But basically, there are "tails" extending well before and well after retirement, but the main part of the distribution is from around 10 years before to around 10 years after, and more than 20 years before or 20 years after, you are way out in the tails.
The fact SORRR starts building up in advance of retirement is basically why Target funds and such initiate a "glidepath" starting in advance of anticipated retirement. The fact it diminishes after retirement explains why "bond tents" and fixed-length TIPS ladders and such are popular in certain circles. It is interesting to ask why Target funds don't do that, and I think the basic answer is a combination of what is actually marketable versus the admittedly limited harm to being overly conservative at advanced ages, particularly since for many households actual desired spending starts converging toward Social Security.
I don't really think it matters so much because the difference is going to be in the tail on the withdrawal side, and you can see that range is pretty negligible.How do you think about it if you have retired before 60?
I'm a big fan of not trying to be overly precise with any of this, because there is too much uncertainty in the necessary inputs to begin with. So at least roughly bridging to Social Security works in the sense it is pretty easy to understand and the typical timeframe makes sense as well in light of the shape of the curve. For some this period will maybe be a little longer, some a little shorter, but again I think it is pointless to try to be too precise anyway.Do you consider it more risky to bridge to social security? If so, and if you have a partner, which one? Would you try to build ladders or other bridges until your highest social security payment? If I am 58 and my largest ss payments come at 70, do you consider SORR risk for all 12 years, but diminishing with each year?
When you have multiple SS payments anticipated starting at different times, you can just figure out how to roughly bridge things so you start out with what will be the maximum amount of SS in the future, and have the bridge get to zero by that point. If you want you can also try to figure out how to step it down at the point the first SS payments would kick in. I note, though, that in the spirit of not being overly precise, if you use laddered ETFs this can be done just by frontloading a bit such that the average duration is lower than it would be if that first payment would never kick in.
Statistics: Posted by NiceUnparticularMan — Tue Jan 06, 2026 9:01 am — Replies 8 — Views 376