What is a primary risk associated with retiring during a market downturn?

Retiring during a market downturn primarily exposes individuals to the risk of depleted savings due to early negative returns. When a retiree begins to withdraw funds from their retirement accounts during a period of poor market performance, their investments may be down in value. This means they are selling assets at a loss to fund their retirement expenses, which can significantly reduce their savings over time.

Additionally, if the market does not recover quickly, those negatively impacted by early withdrawals may deplete their retirement funds prematurely. This phenomenon is often referred to as "sequence of returns risk,” where the order in which investment returns occur has a significant effect on the sustainability of a retiree’s portfolio. If the first few years of retirement coincide with losses, it can lead to irreversible financial damage, making it more difficult to achieve a stable and secure retirement over the long term.