---
title: "Sequence-of-Returns Risk: Real Examples From 2000, 2008, and 2022"
source: https://www.perissosprivatewealth.com/insights/sequence-of-returns-risk-real-examples
publisher: Perissos Private Wealth Management
published: 2026-09-02T05:00:00+00:00
updated: 2026-09-02T05:00:01.72337+00:00
topics: sequence-of-returns risk, retirement withdrawal strategies, market volatility impact, portfolio stress test, retirement planning Oklahoma, diversification in retirement
license: Educational content. Cite with attribution. Not personalized financial, tax, or legal advice.
---

# Sequence-of-Returns Risk: Real Examples From 2000, 2008, and 2022

## Quick answer

Sequence-of-returns risk is the vulnerability of a retirement portfolio to the specific timing of market losses. While average long-term returns may appear sufficient, significant declines occurring early in the withdrawal phase can exhaust assets prematurely, as selling assets in a down market to fund living expenses leaves fewer shares to participate in eventual rebounds.

## Key takeaways

- The 2000 through 2002 bear market resulted in a 37.4% cumulative decline for the S&P 500 over three calendar years, demonstrating that sequence risk can be a multi-year spending problem.
- In 2008, the S&P 500 lost 36.55% while 10-year Treasuries returned 20.10%, highlighting how high-quality bonds can serve as a crucial liquidity source during equity crashes.
- The 2022 market was an anomaly where both the S&P 500 and 10-year Treasuries returned approximately -18%, illustrating that traditional diversification does not always provide a cushion.
- Research by William Bengen suggests that a 4% initial withdrawal rate followed by inflation adjustments is a common benchmark, but even a 4.25% rate could exhaust a portfolio in 28 years under historical stress.
- Sequence risk is amplified by inflation, as seen in 2022 when an 8% CPI-U increase forced retirees to withdraw more dollars from a shrinking asset base.

*Why the order of market years matters more than the average when you are spending from a portfolio*

September 02, 2026

A retirement portfolio can survive a bad year. What it may not survive is a bad year at the wrong time.

That is the heart of sequence-of-returns risk. Two households can earn the same average return over a decade and finish in very different places if one of them is taking money out along the way. During the working years, a decline is mostly a paper problem. You still have a paycheck, and the next contribution buys cheaper shares. In retirement, the paycheck is coming from the portfolio. Selling after a decline locks in the loss, and those shares are no longer there when the market recovers.

I do not think clients need a lecture about volatility. They need a clearer picture of how timing showed up in real markets. The last quarter-century gave us three useful stress tests: the 2000 through 2002 bear market, the 2008 financial crisis, and 2022. They were not the same event. That is the point.

## Averages Hide The Timing Problem

William Bengen's 1994 withdrawal-rate research started from a planner's mistake that is still common. If stocks have compounded 10.3 percent and inflation has averaged 3 percent, it is tempting to treat a 5 percent real withdrawal as the "earnings" a portfolio can pay. Bengen showed why that logic fails. What matters is the year-by-year path, not the long-run average. In his historical tests, a 4 percent first-year withdrawal, followed by inflation adjustments, never exhausted a portfolio in fewer than 33 years. A 4.25 percent starting rate could exhaust a portfolio in as little as 28 years in the same data. 1

The takeaway is not that 4 percent is a magic number. The takeaway is that early losses plus ongoing spending can do damage that later gains do not fully repair. It is like draining a swimming pool with a hose while rain is still in the forecast. The total rainfall over ten years may look fine. If you drain hard during a drought, the pool can get too low to recover even after the storms arrive.

The SEC makes the same point in plainer language. Asset allocation depends on time horizon and risk tolerance. Investors who need money sooner—including for living expenses in retirement—may prefer less volatile holdings because they may not have time to wait for a rebound. 2,3 Sequence risk is the planning name for that time-horizon problem once withdrawals have started.

Figure 1 shows the calendar-year total returns that defined the three episodes: S&P 500 stocks, including dividends, and 10-year U.S. Treasury bonds. The stock years are the ones people remember. The bond years are the ones that decided whether a balanced retiree had a cushion. 4

 Figure 1: Calendar-year total returns for the S&P 500 (including dividends) and 10-year U.S. Treasuries in 2000, 2001, 2002, 2008, 2009, and 2022. 

## 2000: A Slow Leak, Not A Single Crash

The early-2000s decline did not arrive as one dramatic year. It arrived as three of them. Damodaran's S&P 500 total-return series, which includes dividends, shows calendar-year losses of 9.03% in 2000, 11.85% in 2001, and 21.97% in 2002. 4 Stacked together, that is a 37.4% cumulative decline in the stock index over three calendar years.

The NBER dated a recession from March 2001 to November 2001, an eight-month contraction. 5 The market damage lasted longer than the official recession. That is one reason this episode still teaches a useful lesson. Sequence risk is not only a recession story. It is a spending-while-falling story.

Bonds were the offset. Ten-year Treasuries returned 16.66% in 2000, 5.57% in 2001, and 15.12% in 2002. 4 A retiree who held only stocks spent three years selling a shrinking pile. A retiree who held a mix of stocks and high-quality bonds had a second engine. Inflation was present but not the main character. Annual CPI-U inflation was 3.4% in 2000, 2.8% in 2001, and 1.6% in 2002. 6

The 2000 retiree did not need a forecast that the market would keep falling. The retiree needed a way to fund spending without turning every monthly bill into an equity sale.

## 2008: One Ugly Year And A Useful Reminder About Bonds

2008 was the opposite shape. It was concentrated. The S&P 500 lost 36.55% in 2008, then gained 25.94% in 2009. 4 The NBER dated the recession from December 2007 to June 2009, eighteen months, the longest of the three modern contractions on its chronology. 5

If you retired into 2008 with a stock-heavy portfolio and a rigid withdrawal, the first year did most of the damage. Ten-year Treasuries, though, returned 20.10% in 2008. 4 That is the part of the 2008 story that gets skipped in the highlight reel. Diversification did not prevent the decline. It changed the size of the hole a balanced retiree had to climb out of.

Then the rebound arrived quickly, and it arrived while inflation briefly went the other way. CPI-U inflation was 3.8% in 2008 and -0.4% in 2009. 6 A household using an inflation-adjusted spending rule did not have to give itself a raise in 2009. That is a small mechanical point with a large planning implication. Sequence risk is worse when asset prices and living costs fall at the same time for the portfolio and rise at the same time for the household.

2008 also showed the behavioral risk sitting underneath the math. The SEC's investor-education guidance is direct: do not make rash decisions in volatile markets, and if retirement is close, consider whether the mix should already be more conservative. 3 The households that sold stocks at the lows converted a sequence problem into a permanent one.

## 2022: The Year Diversification Did Not Show Up

2022 is the episode I want clients to understand most clearly, because it broke a habit many of us had absorbed from 2000 and 2008.

Stocks fell. The S&P 500 total return was -18.04%. 4 That is a bad year, but it was not 2008. The new problem was the other sleeve. Ten-year Treasuries returned -17.83%. 4 A 60/40 mix, rebuilt each year from those two series, returned about -18% --- almost no cushion at all. The usual reason to own bonds in a retirement portfolio is that they often behave differently from stocks. In 2022 they did not.

Inflation made it worse. CPI-U inflation was 8.0% in 2022, then 4.1% in 2023. 6,7 A retiree following an inflation-adjusted withdrawal rule had to take more dollars out of a smaller portfolio. That is sequence risk with a cost-of-living kicker.

And 2022 was not a recession. The NBER's most recent contraction is still February 2020 to April 2020. 5 A household waiting for an official downturn before changing spending, cash reserves, or withdrawal sources would have been waiting on the wrong signal.

The recovery was real. The S&P 500 returned 26.06% in 2023, 24.88% in 2024, and 17.78% in 2025. 4 That rebound is why some people now remember 2022 as a dip rather than a lesson. I would not. The lesson is that the first year can still open a hole, and that bonds are not a guarantee. They are a tool that works in some sequences and fails in others.

## What A $2 Million Retiree Would Have Experienced

Figure 2 translates those market years into a household picture. It is a hypothetical, not a recommendation. Assume $2 million on January 1, a 60/40 mix of the S&P 500 total-return series and 10-year Treasuries, annual rebalancing, and a $80,000 first-year withdrawal—4% of the starting value—taken at the beginning of each year and then increased by that year's CPI-U inflation. No fees, no taxes, no Social Security, no pension. Those omissions make the illustration cleaner, not more realistic.

 Figure 2: Hypothetical remaining value of a 2 million dollar 60/40 portfolio taking a 4 percent inflation-adjusted withdrawal, for retirements beginning in January 2000, January 2008, and January 2022. 

A January 2000 retiree ended the first year with about $1.94 million. The 60/40 mix actually eked out a small positive return in 2000 because Treasuries more than offset stocks. The damage came from repetition. After 2001 and 2002, the portfolio was about $1.57 million. By the end of 2003, even after a strong stock year, it was still about $1.73 million. 4,6

A January 2008 retiree took the harder first punch. The same 60/40 rules left about $1.65 million at year-end 2008. Then 2009 and 2010 helped. By the end of 2011 the portfolio was about $1.92 million, close to where it started, after four years of withdrawals. 4,6

A January 2022 retiree had the weakest first year of the three. The 60/40 mix ended 2022 near $1.58 million, and the next year's scheduled withdrawal rose to $86,400 because inflation was 8.0%. The subsequent stock recovery then did a lot of work. By the end of 2025 the same rules left about $2.05 million. 4,6,7 That is not an argument that 2022 was gentle. It is evidence that the first-year hole was real, and that the repair depended on a rebound that was not guaranteed when the year began.

To isolate the sequencing effect itself, I also ran a 100% stock version of 2000 through 2009. With no withdrawals, reversing the annual returns does not change the ending value. Both paths finish near $1.82 million. Once the 4% inflation-adjusted withdrawals are turned on, order matters. The actual 2000-start sequence ends near $864,000. The same returns in reverse finish near $1.02 million. 4,6 Same years. Same average. Different remaining capital. That is sequence-of-returns risk in one comparison.

## Who This Helps, And Who It Does Not

Sequence risk matters most when the portfolio is the paycheck. It matters less when Social Security, a pension, rental income, or a business-sale installment already covers the core bills. It also matters less when the household can cut discretionary spending without touching the long-term plan.

It is a poor fit as a scare story for a still-working household that is contributing, not withdrawing. For that person, a decline can be an opportunity to keep buying. It is also a poor fit as a reason to abandon growth entirely. Retirement can last three decades. A portfolio built only to survive the next bad year can fail a different test: inflation, longevity, and the need for the later years to still have purchasing power.

The useful responses are structural. Keep near-term spending in assets that do not require an equity sale at a low. Let later-year assets stay invested. Build some spending flexibility before the market asks for it, not during the year it does. Be careful about raising withdrawals after a few strong years, which is the exact warning Bengen issued when he looked at retirees who started just before a later crisis. 1 Coordinate account choice with the client's CPA, because the tax lot you sell in a down year can make a sequence problem more expensive than the market decline alone.

I do not view any of those steps as products. They are ways to stop a calendar year from dictating a household decision.

## The Perissos View

I want the investment plan and the spending plan to be designed as one problem.

That usually means a long-horizon mix with enough growth to fund a long retirement, paired with a documented source for the next several years of portfolio withdrawals. It means remaining tax-aware rather than tax-driven, because the account you spend from in a bad year can matter as much as the allocation. It means writing down what would cause spending to flex, and what would not. And it means doing that work with the client's CPA and attorney when taxes, trusts, required distributions, or estate liquidity are in the mix.

The three episodes in this memo are not a forecast. They are a reminder. 2000 taught us that losses can last longer than a recession. 2008 taught us that a single year can open a hole, and that high-quality bonds can still do a job. 2022 taught us not to assume the next bad stock year will come with a helpful bond year.

## Closing

The takeaway is that retirement risk is not only "what will markets return?" It is "in what order, and what will we sell while we wait?"

A high-net-worth plan should be able to fund spending through a 2000-style grind, a 2008-style crash, and a 2022-style year when stocks and bonds fall together. If it can do that without forcing the household to rewrite its life in the first twelve months, the later recoveries have a chance to matter.

All my best,

Brandon VanLandingham, CFA, CMT, CFP

 

## Related Reading

[Reducing Capital Gains on a Highly Appreciated Portfolio](/insights/reducing-capital-gains-highly-appreciated-portfolio)

[Estate Planning Documents Every Oklahoma Family Needs](/insights/estate-planning-documents-every-oklahoma-family-needs)

[The Hidden Costs of "Buy and Hold" for Retirees Drawing Income](/insights/sequence-of-returns-risk-retirement-income)

 

## Citations

 

- William P. Bengen, "Determining Withdrawal Rates Using Historical Data," Journal of Financial Planning, October 1994; Financial Planning Association 25th-anniversary reprint, retrieved August 23, 2026, https://www.financialplanningassociation.org/sites/default/files/2021-04/MAR04%20Determining%20Withdrawal%20Rates%20Using%20Historical%20Data.pdf.

 

- SEC Investor.gov, "Asset Allocation and Diversification," retrieved August 23, 2026, https://www.investor.gov/introduction-investing/getting-started/asset-allocation.

 

- Lori Schock, "Don't Panic, Plan It!," SEC Investor.gov, retrieved August 23, 2026, https://www.investor.gov/additional-resources/spotlight/formerdirectorlorischock-directors-take/dont-panic-plan-it.

 

- Aswath Damodaran, "Historical Returns on Stocks, Bonds and Bills: 1928-2024," NYU Stern School of Business, updated January 5, 2026, retrieved August 23, 2026, https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html.

 

- National Bureau of Economic Research, "US Business Cycle Expansions and Contractions," data last updated March 14, 2023, retrieved August 23, 2026, https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions.

 

- Federal Reserve Bank of Minneapolis, "Consumer Price Index, 1913-," annual average CPI-U percent change compiled from U.S. Bureau of Labor Statistics data, retrieved August 23, 2026, https://www.minneapolisfed.org/about-us/monetary-policy/inflation-calculator/consumer-price-index-1913-.

 

- U.S. Bureau of Labor Statistics, "Summary of annual and semi-annual indexes," CPI-U U.S. city average annual percent change, retrieved August 23, 2026, https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexannualandsemiannual_table.htm.

## Important Disclosures

 

This piece is educational. It is not legal, tax, or accounting advice and is not a recommendation to take or refrain from any specific action. Tax law is fact-specific and changes regularly. Please coordinate any decisions discussed here with your attorney, your CPA, and Perissos before acting.

Perissos Private Wealth Management is a Registered Investment Adviser ("RIA"). Registration as an investment adviser does not imply a certain level of skill or training, and the content of this communication has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Perissos Private Wealth Management renders individualized investment advice to persons in a particular state only after complying with the state's regulatory requirements, or pursuant to an applicable state exemption or exclusion. All investments carry risk, and no investment strategy can guarantee a profit or protect from loss of capital. Past performance is not indicative of future results.

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## Frequently asked questions

### What is sequence-of-returns risk in retirement planning?

It is the danger that the timing of market declines, particularly in the early years of retirement, will permanently deplete a portfolio while a retiree is actively taking withdrawals.

### How did the market downturns of 2000 and 2008 differ for retirees?

The 2000-2002 period was a multi-year decline where bonds provided a strong cushion, whereas 2008 was a concentrated one-year crash followed by a rapid recovery.

### Why was the 2022 market uniquely challenging for sequence risk?

In 2022, both stocks and 10-year U.S. Treasuries fell roughly 18% simultaneously, preventing traditional bond diversification from offsetting equity losses during a period of high inflation.

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Source: [Perissos Private Wealth Management](https://www.perissosprivatewealth.com/insights/sequence-of-returns-risk-real-examples) — fee-only fiduciary wealth management in Bethany, Oklahoma. 405.212.9690.

This article is educational and is not personalized financial, tax, legal, or investment advice.