PARTING SHOT

How timing the benefit can help with a classic retirement problem: an early bear market.

HE FIRST TIME I EXPLAINED SEQUENCE-OF-RETURNS RISK TO A client, I didn’ t use a chart. I used a breadbasket.

We were on the patio at Gibson Bar & Steakhouse in Chicago when Mark slid his retirement spreadsheet across the table as if it were a peace treaty. He’ d shown up early and chosen a seat along the wrought iron fence facing the city’ s Viagra Triangle. He was in his mid-60s with about $ 2 million saved and a paid-off condo … the disciplined,“ did-everything-right” type.“ Ray,” he said,“ I’ m fine. I only need 4 %. Everyone says 4 %.” I pulled two rolls from the basket.“ Same portfolio,” I said.“ Same withdrawal.

Same long-term average return. Different order of returns.” I tore a hefty chunk from the first roll and set the damaged roll down.“ Bad market early.” Then I tore a much smaller piece from the second.“ Bad market late.”

“ When you’ re withdrawing from a volatile portfolio,” I told him,“ the first five to 10 years are the danger zone. If markets drop and you still need income, you sell more shares at depressed prices. That permanently shrinks what’ s left to rebound.”

He stared at his spreadsheet.“ So even if the market averages out … I can still run out?”

“ Exactly,” I said.“ Sequence risk isn’ t whether markets rise. It’ s when they drop— especially early.”

Mark pointed at the allocation column.“ OK. So how do I not get rolled? Buy more bonds?”

“ Maybe,” I said.“ But there’ s a bigger lever most advisors leave on the table: Social Security.”

Most advisors treat Social Security as a stand-alone paycheck: file it, start the checks, move on. I treat it as a distribution policy tool— a volatility buffer that protects the portfolio right when sequence risk is at its worst.

Benefit As Volatility Buffer

Most advisors treat Social Security as a stand-alone paycheck: file it, start the checks, move on. I treat it as a distribution policy tool— a volatility buffer that protects the portfolio right when sequence risk is at its worst.

After a person reaches full retirement age, they can increase their Social Security benefits about 8 % per year by delaying them— up to age 70( plus they get cost-ofliving adjustments). That increase doesn’ t care what the market does.

A larger benefit raises the income floor, which means a person’ s investment portfolio has to supply less income for life— reducing the odds that an early bear market becomes a permanent pay cut.

Mark raised an eyebrow.“ You want me to wait on the check?”

“ Yes. Think of it like insurance against bad timing,” I said.“ Not with a product— with the claiming decision.”

The Bridge That Changes The Math

“ If I delay, I have to spend more from my portfolio now,” Mark said.“ Doesn’ t that make sequence risk worse?”“ It can,” I said.“ So, we plan the bridge.” I boxed one line on his sheet.“ You and continued on page 58

60 | FINANCIAL ADVISOR MAGAZINE | MAY / JUNE 2026 WWW. FA-MAG. COM