Broker Check

What is Systematic Withdrawal (or Distribution) Risk?

Simply put, Systematic Withdrawal (or Distribution) Risk is the risk that you may prematurely run out of money during a systematic withdrawal program before you planned to due to early negative returns that you hadn’t counted on. Uhg.

Okay, that sounds scary. Now please explain that in plain language. 

Right. So, the first thing to understand is that the outcome for people who are saving for retirement vs spending in retirement is generally very different.  A big part of this is because the Annual Rate of Return of a financial asset may not necessarily be the same thing as the overall Average Rate of Return for that same asset or assets over a given period of time. Let’s quickly explore the difference between some possible Accumulation and Distribution experiences.


Disclosure: Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. This is a hypothetical example and is not representative of any specific investment. Your results may vary.