The Uneven Math of Losses and Gains

Gains and losses are not mathematically symmetric. A 10% loss only requires an 11.1% gain to recover, but a 50% loss requires a full 100% gain just to get back to even. The deeper the loss, the harder the climb back, and the math gets even less forgiving when a loss happens while you're also withdrawing income, which is exactly what makes sequence of returns risk so dangerous in retirement.

This is exactly the kind of risk a Pension Strategy is built to remove. Because your income is based on a guaranteed benefit base rather than your actual portfolio balance, a market downturn right before or during retirement doesn't force you to claw your way back to even before your income can even start. We cover how this plays out over a full retirement timeline in a separate article on sequence of returns risk.