Sequence Return Risk is the risk you take on when withdrawing money from your investments when typically no longer contributing to the principal amount.
For example, in 2008 the Global Financial Crisis occurred and many asset prices dropped by 50% in value –
- if you invested $1 million in 2007 and withdrew 4% p.a. whilst earning 8% p.a. interest each year by 2019 you will have less than $1 million in your superannuation account.
- If you invested $1 million in 2009 and withdrew 4% p.a. whilst earning 8% p.a. interest each year by 2019 you will have more than $1 million in your superannuation account.