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1954 vs. 1963: How Luck and Sequencing Risk Create a 3x Wealth Gap in Retirement
Posted on 2/17/26 at 9:12 pm
Posted on 2/17/26 at 9:12 pm
Loading Twitter/X Embed...
If tweet fails to load, click here. quote:
The deeper lesson from this exercise is that a substantial part of your retirement outcome depends on when you are born. You can do everything right (save diligently from your first paycheck, invest consistently, stay the course through every crash, never panic sell) and still end up with vastly different results than someone who did the same thing a decade earlier or later. The 1963 cohort did nothing wrong. They just had the misfortune of turning 68 in 2009.
No allocation strategy eliminates this. Even under the glide path, the best cohort ends up with substantially more than the worst. Sequencing risk is, to a significant extent, a matter luck.
7
Posted on 2/17/26 at 9:21 pm to Street Hawk
Not wrong but you control the things you can control.
The only thing you can really control is the number of fees you pay.
Which is why low cost indexing is so important.
I know there has been a lot of talk about the glide path and taking risk off the table. I think you see less and less do it because they have enough saved to absorb major down turns but it's hard for many to stomach.
Reality is lately is there are two groups of people. Not as many in the middle
Under savers, who basically have nothing
Over savers, which die with more than they started
The only thing you can really control is the number of fees you pay.
Which is why low cost indexing is so important.
I know there has been a lot of talk about the glide path and taking risk off the table. I think you see less and less do it because they have enough saved to absorb major down turns but it's hard for many to stomach.
Reality is lately is there are two groups of people. Not as many in the middle
Under savers, who basically have nothing
Over savers, which die with more than they started
Posted on 2/17/26 at 10:06 pm to Street Hawk
quote:
Even under the glide path, the best cohort ends up with substantially more than the worst.
Why is this a focus of the twitter OP?
Much more useful to see how often the worst cohort "fails" and runs out of money prior to death.
Posted on 2/18/26 at 6:22 am to UltimaParadox
quote:
Reality is lately is there are two groups of people. Not as many in the middle
Under savers, who basically have nothing
Over savers, which die with more than they started
I really do think I've hit a relative sweet spot. Now, bolstered with a pension, of course, but without that I would be considered an "undersaver" with a little more than nothing. And, I'm going to work a little longer because I overbought a house kind of late.
It is better to oversave, early, and then throttle back and live (if you choose that) than to chronically underprepare, sweat out your 50s and early 60s and still struggle in retirement, IMHO. (Oversaving a far superior vice, in other words).
Posted on 2/18/26 at 6:24 am to JohnnyKilroy
quote:
Why is this a focus of the twitter OP?
Frankly, it is another form of class warfare. "Year of birth shouldn't determine your outcome, so let the government control everything" seems to be the implied argument.
Posted on 2/18/26 at 7:24 am to Ace Midnight
I think most everyone who cares about this knows about sequence of returns risk. But since the future sequence of returns is unknowable, the best way to account for it is to think in terms of safe withdrawal rates that would have kept you solvent in retirement even during the worst historical sequences of returns. Which is where the 4% rule came from, basically. It's either that or invent a time machine.
Posted on 2/18/26 at 7:53 am to UltimaParadox
quote:
you control the things you can control.
This. I was a year early for TOPS. I was 10 years too early for student loan forgiveness for public servants. Nothing I can do about it but pay off my student loans and invest.
Posted on 2/18/26 at 8:02 am to Street Hawk
The same works with entering the work force, which is why Millennials had a rough go of things in 2009-2010 and then Gen Z and Millennials felt the brunt 10 years later with the Covid economy.
There are all sorts of nasty pathologies that emerge for population cohorts that enter the job market during big recessions.
There are all sorts of nasty pathologies that emerge for population cohorts that enter the job market during big recessions.
Posted on 2/18/26 at 8:04 am to Ace Midnight
quote:
"Year of birth shouldn't determine your outcome, so let the government control everything" seems to be the implied argument.
Where does he reference the government?
It seems to be more of a simple factual statement on the impact of certain, random-ish variables.
quote:
it is another form of class warfare
-class
+generational
Posted on 2/18/26 at 8:42 am to Street Hawk
thought we were supposed to be moving into bonds more as we get closer to retirement to help mitigate this?
ETA: sorry, just got to the glide part of the article.
ETA: sorry, just got to the glide part of the article.
This post was edited on 2/18/26 at 8:44 am
Posted on 2/18/26 at 9:27 am to Street Hawk
quote:
The deeper lesson from this exercise is that a substantial part of your retirement outcome depends on when you are born.
Boomer downvotes incoming
Good thing millenials don’t have to worry about this since we’ll never retire
Posted on 2/18/26 at 10:05 am to Street Hawk
And Bolivian honey farmers made even more money after the African Bees were released. They learned the risks and adapted to them, and benefited from a greater return from a more productive but riskier process.
Posted on 2/18/26 at 10:19 am to Street Hawk
quote:if one was still heavy stocks at 68, one likes to gamble
They just had the misfortune of turning 68 in 2009.
Posted on 2/18/26 at 10:20 am to CharlesUFarley
quote:African Honey Bees also resist Colony Collapse Disorder. Funny if years later we saved ourselves BY accidentally releasing them.
And Bolivian honey farmers made even more money after the African Bees were released.
Posted on 2/18/26 at 3:05 pm to UltimaParadox
quote:
I know there has been a lot of talk about the glide path and taking risk off the table. I think you see less and less do it because they have enough saved to absorb major down turns but it's hard for many to stomach.
My wife and I realized after a certain point we were good with a 60/40 equity/fixed income path before retirement. Fortunately we had accumulated enough to survive. I haven't wavered from that today.
I say fortunately because we had reached a level that we had enough assets to last our perceivable lifetime. Once you have won the game, why play. My heirs will still inherit plenty unless shite goes way sideways.
This post was edited on 2/18/26 at 3:12 pm
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