Timing Risk

Posted December 30, 2025, By Cole Ferrier

Key Takeaways:

• Timing Risk is the danger that you happen to retire at a particularly unfortunate moment, such as right before a major market crash, a spike in inflation, or a period of low interest rates.

• This risk isn't a new threat; it's the dangerous combination of several risks we've already discussed—Market Risk, Inflation Risk, and Sequence of Returns Risk—all hitting at once.

• Two retirees with identical savings and identical plans can have wildly different outcomes based on nothing more than the "luck of the draw" of their retirement start date.

• You cannot control timing, but you can control preparedness. The best solutions involve building a resilient, "all-weather" plan with buffers, flexibility, and a secure income floor that can withstand a worst-case scenario start.

Throughout our series on debugging retirement risks, we have carefully isolated and analyzed specific threats to your financial blueprint. We've engineered defenses against the long run of Longevity Risk, the slow corrosion of Inflation Risk, and the gut-wrenching volatility of Market Risk. Now, we arrive at the risk that brings them all together in a perfect storm: Timing Risk.

Timing risk is the ultimate "luck of the draw" in retirement planning. It's the simple, unnerving fact that the success of your meticulously crafted plan can be disproportionately affected by the economic conditions that exist in the precise year you decide to stop working. Retiring into a calm, sunny market is like setting sail with a strong tailwind. Retiring into a raging storm can capsize your vessel before it ever leaves the harbor.

From my engineering perspective, this is the challenge of designing a system that must launch into an unpredictable and sometimes hostile environment. You can't control the weather on launch day. Therefore, you must build a vessel that is so robust, so resilient, and with so many contingency systems that it can survive a worst-case scenario launch. A retirement plan that only works if the timing is perfect is not a plan; it's a gamble.

By the Numbers

• 1966 vs. 1975: Two illustrative retirement years. A person retiring in 1966 with a 60/40 portfolio could have sustainably withdrawn about 4% of their initial assets. Someone retiring just nine years later, in 1975, after a deep bear market, could have withdrawn much more. The difference was not the plan, but the timing. 

• 337% vs. 206%: The difference in cumulative inflation over two 25-year retirement periods. A person retiring in 1974 saw prices increase by 337% over the next quarter-century. Someone retiring in 1986 saw "only" a 206% increase. Bad timing can mean facing a much stronger inflationary headwind. (Source: "Retirement Risk Solutions," The American College of Financial Services, 2017)

From the Case Files

Consider our friends Tom and Jerry again. This time, they don't just face one bad year; they face a bad era.

• Tom retires in 2000. He leaves his job at the peak of the dot-com bubble, with stock valuations at historic highs. He immediately faces a brutal bear market, followed by another just a few years later in 2008. The combination of high starting valuations (predicting low future returns) and two major market crashes in his first decade creates a devastating sequence of returns.

• Jerry retires in 2010. He leaves his job after the storm has passed. Stock valuations are more reasonable, and he retires into one of the longest bull markets in history.

Though both started with the same assets and the same withdrawal plan, Tom's plan is under constant stress and has a higher likelihood of failing, while Jerry's thrives. The only difference was the "luck" of their retirement date.

Understanding the Risk: The Great Uncontrollable

Timing Risk is the aggregation of other risks, concentrated at the most vulnerable point in your financial life: the transition into retirement. It is the real-world manifestation of Sequence of Returns Risk. A "bad sequence" is bad timing. It can take several forms:

• Retiring into a Bear Market: This triggers Market Risk at the worst possible moment, forcing you to sell assets at low prices to generate income.

• Retiring into an Inflationary Spike: This triggers Inflation Risk, rapidly increasing your living expenses and forcing higher withdrawals just as market returns may be faltering. The "stagflation" of the 1970s was a prime example.

• Retiring into a Low-Interest-Rate Environment: This triggers Interest Rate Risk, meaning the "safe" portion of your portfolio generates very little income, again putting more pressure on your stocks.

Worse yet, these can all happen at the same time.

The Impact on Your Plan: The Initial Conditions

The initial conditions at the start of your retirement have a disproportionately large impact on the final outcome.

• Interaction with Longevity Risk: If you have bad timing at the start of a 50-year FIRE retirement, the initial damage is almost impossible to overcome. You have five decades for that initial shortfall to compound against you. Good timing, conversely, can set you up with such a large cushion that your plan becomes virtually indestructible.

• Interaction with Forced Retirement Risk: This is a particularly cruel combination. The market crashes, your company has layoffs, and you are pushed into retirement (Forced Retirement Risk) at the exact moment the market is at its worst (Timing Risk). This removes your ability to work a few more years and let the storm pass, which is often the best solution.

Solutions & Your Risk Mitigation Toolkit

You can't control the timing, but you can build a plan that is less sensitive to it. An "all-weather" blueprint has defenses that work in any environment.

• Tool #1: The Buffer Zone (Cash Bucket). This remains the single most powerful tool against bad timing. Having 1-3 years of living expenses in cash and short-term bonds means you can ride out a two-year bear market without selling a single share of stock. It allows you to create your own "good timing" by decoupling your income needs from the market's whims.

• Tool #2: A Flexible Spending Strategy. Your spending is a powerful lever. A plan with "guardrails" that automatically reduces withdrawals during a downturn means you are adaptable. This flexibility is what allows a plan to survive a bad start and recover.

• Tool #3: A Guaranteed Income Floor. This is the ultimate timing-agnostic tool. Income from Social Security, pensions, or annuities arrives every month regardless of what the stock market is doing. The larger this guaranteed floor is relative to your essential needs, the less sensitive your overall plan is to market timing, as you have less need to draw from your volatile portfolio. This is a key reason delaying Social Security is so powerful.

• Tool #4: A Valuation-Informed Approach (Advanced). While you can't predict markets, you can be aware of conditions. When retiring in a period of extremely high stock valuations (like 2000), it's prudent to adopt a more conservative initial withdrawal rate. Conversely, after a deep crash, a slightly more aggressive rate may be reasonable.

An All-Weather Framework for Managing Timing Risk

Strategically, timing risk is the danger that your plan's success will be dictated by the "luck of the draw" of the economic conditions on your retirement date. It's the perfect storm where a bear market, high inflation, and a poor sequence of returns all converge at your plan's most vulnerable point: the very beginning.

A plan is most vulnerable when it is rigid, lacking the buffers and flexibility needed to survive a worst-case scenario launch. A resilient plan, by contrast, is an "all-weather" plan, engineered to be robust regardless of its start date. This is achieved by installing a dedicated buffer (a cash reserve) to navigate initial turbulence, building in flexibility (dynamic spending rules) to conserve resources when headwinds are strong, and securing a portion of your income from a guaranteed income floor that is immune to the external environment.

Conclusion: The Great Balancing Act

The fundamental trade-off in managing timing risk is between being fully invested for maximum growth and holding back resources in defensive, lower-return assets as a buffer. In a bull market, a cash reserve feels like a drag on performance. In a bear market, it's the single thing that can save your plan. The "great balancing act" is maintaining the discipline to keep your vessel prepared for a storm, even when the sun is shining. Because you cannot control the weather on your retirement day, you must control the seaworthiness of your ship.

Create Your Financial Compass with Us

Are you worried about retiring at the "wrong time"? We specialize in building all-weather financial plans that are designed to be resilient, no matter the market conditions at launch. Let's build a strategy that gives you confidence, regardless of the headlines. Contact us today.

Resources:

• The American College of Financial Services - Retirement Income Center: Publishes research and articles on retirement risks, often analyzing different historical starting points. (retirement.theamericancollege.edu)

• Morningstar: A source for historical market data and analysis of how portfolios have performed in different economic environments. (www.morningstar.com)