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Why a market fall hurts more once you start withdrawing

Updated 1 October 2026

While you're working, a bad year in the markets is unpleasant but survivable. You aren't touching the money. You keep contributing, and you wait.

After you stop working, that changes. If you're drawing on your investments to pay for daily life, a fall forces you to sell at low prices. The units you sell in a bad year aren't there when prices recover.

That's the risk this post is about. It has a name, sequence risk: the order in which good and bad years arrive matters once money is flowing out.

Same returns, different order

Here's an illustration. It's made-up numbers to show the effect, not a forecast or a view on any market.

Two people each start retirement with $300,000 invested. Each takes out $18,000 at the start of every year. Over ten years, both get exactly the same ten yearly returns: -20%, -10%, 5%, five years of 8%, then 10% and 12%.

The only difference is the order. Person A gets the two bad years first. Person B gets them last.

Person A (bad years first)Person B (bad years last)
Balance after year 1$225,600$315,840
Balance after year 5$166,347$349,602
Balance after year 10$138,076$236,741

Assumptions: withdrawals at the start of each year, no fees, no further top-ups, returns applied to the remaining balance.

Same returns, same withdrawals, about $98,700 apart after ten years. If neither of them had withdrawn anything, both would have ended with the same $410,556. The withdrawals are what turn the order of returns into a real loss.

You can't choose the order your years arrive in. What you can control is how much you're forced to sell when a bad one comes.

Start with income that doesn't depend on markets

The first defence is a floor of income that keeps coming whatever the markets do.

For most Singaporeans that floor is CPF LIFE. It pays a monthly amount for life, and your CPF savings are invested in special Singapore Government Securities that aren't traded on the market. Your Retirement Account earns at least 4% a year, a floor the Government has extended to the end of 2027.

So the first question isn't about your portfolio. It's how much of your monthly spending CPF LIFE already covers. If CPF LIFE pays for your essentials, a market fall touches only your extras. If CPF LIFE covers only half, your investments carry more weight and need more care.

Some people raise that floor before 65 by moving Ordinary Account savings or cash into their Retirement Account. That money can't be taken back out except as monthly payouts, so think it through first.

Keep spending money out of the market

The second defence is to hold the next year or two of withdrawals somewhere that doesn't swing with share prices. Then a bad year doesn't force a sale.

MoneySense, the national financial education programme, points to liquid, low-risk options such as Singapore Savings Bonds for money you need soon. The idea is simple: what you'll spend in the near term shouldn't be riding on the stock market.

When markets are up, you refill that cash from your investments. When they're down, you spend the cash and leave your investments alone to recover.

Spread what you do invest

MoneySense describes diversification as holding assets that don't all move in the same direction at the same time. You may give up some gains, but you lower the chance of one event hitting everything.

For a retiree, that usually means not having everything in one share, one sector or one country. It also means checking whether your holdings overlap. Three funds that all hold the same large companies aren't three separate bets.

Be careful with familiar advice

Some investing advice is built for people still saving. Dollar-cost averaging, for example, means putting in a fixed sum at regular intervals. MoneySense says it removes the risk of timing the market wrongly. That works when money is going in. A retiree is usually taking money out, so the same tool doesn't solve the same problem.

"Stay invested for the long term" has the same issue. It's sound for a 40-year-old. At 70, your horizon is shorter and you're spending as you go, so you need to know which part of your money can wait out a fall and which part can't.

Review on a schedule, not on headlines

MoneySense suggests reviewing your portfolio regularly and rebalancing to fit your life stage. Pick a time, such as once a year, and check three things:

  • How much of your monthly spending is covered by CPF LIFE and other steady income
  • How many months of withdrawals you hold outside the market
  • Whether your investments still match the risk you can afford to take

Doing this on a fixed date stops you from making big changes in a panic during a bad week.

If you'd like to go through those three questions with a Financial Consultant, you can book a free retirement review.

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