Withdrawal timing and return order: read the cash shortfall, not just the balance

A reproducible two-year sequence example and an explicit depletion example explain what retirement drawdown charts can hide.

A retirement balance chart does not tell you whether all requested spending was funded. A portfolio can finish at zero under two different return paths while one path leaves more unpaid cash needs. The withdrawal and sequence tools retain the full request after depletion so that this distinction remains visible.

A two-year order experiment

Begin with 100 of capital and request 10 at the beginning of each year, with no fees or inflation. In the first ordering,−20% followed by+25%, year 1 begins by withdrawing 10 from 100. The remaining 90 becomes 72. In year 2, withdraw 10 from 72, leaving 62; a 25% gain makes 77.50.

Reverse exactly the same returns. After the first withdrawal,90 grows 25% to 112.50. The second withdrawal leaves 102.50; a 20% loss produces 82.00. Both lists have an arithmetic average of 2.5% and the same total no-cash-flow growth factor, yet funded withdrawals interrupt compounding at different points. The result difference is 4.50.

Set withdrawals to zero and both paths end at 100, because 0.8×1.25=1. This is a controlled arithmetic demonstration, not observed portfolio history. Try it in the sequence of returns calculator. Its return list is reversed, not randomly drawn or optimized to find a worst case.

Timing is part of the scenario

A beginning-of-year withdrawal reduces capital before that year’s return and percentage asset fee. An end-of-year withdrawal follows the year’s growth and fee. Keep this choice identical when isolating the effect of return order. The sequence tool deliberately holds the return set, requested withdrawals, inflation and fee constant between A and B.

Keep unfunded requests after depletion

Take a separate zero-return example:100 starting capital,40 requested each year, no inflation/fees and 3 years. The requests total 120. Funded cash is 40,40 and 20; year 3 has 20 unfunded. Ending balance is zero. If the horizon extends another year, that year’s requested 40 remains unfunded rather than disappearing from the report.

First unfunded year and first zero balance are not equivalent. With 80 starting capital and two 40 withdrawals, both withdrawals can be funded in full while leaving zero. A third requested withdrawal would be the first unfunded one. The drawdown calculator labels the first unfunded year explicitly and provides every annual cash row.

Read purchasing power separately

The first year uses the entered base spending and other income. Both increase by the selected index beginning in year 2. Closing balances expressed in start-year purchasing power divide the year-end nominal balance by the cumulative price factor. A fixed nominal pension is a different assumption from the identically indexed other income used in this model.

What this test cannot conclude

It does not estimate the probability of future returns, life expectancy, a sustainable withdrawal rate or a recommended portfolio. Reversing one list examines one alternative ordering, not all possible futures. The Vanguard retirement-risk overview discusses broader uncertainty. AllMarkets supplies its own deterministic arithmetic and no claim of professional certification.