THE BUCKEYE RETIREMENT BRIEF

Plain talk on taxes, investing, and retiring well in Ohio

Issue of July 6, 2026  |  JCS Retirement Tax Advisors

The retirement forums spent the past two weeks arguing about market jitters and what an early downturn does to a brand new retirement. Morningstar also refreshed its safe withdrawal research for 2026, which set off its own round of debate. Underneath both conversations sits the same idea, one most people have never heard named. It is called sequence of returns risk, and this issue walks through it with an Ohio lens.

Sequence of Returns Risk: Why the First Five Years Carry the Most Weight

What Sequence Risk Actually Is

Sequence of returns risk is the danger that the market drops early in your retirement, right when you start withdrawing money. The average return over thirty years can be perfectly fine and the plan can still fail, because once withdrawals begin, the order of the returns matters as much as the returns themselves.

Why It Matters

While you are saving, a bad year is just a bad year. Prices fall, your contributions buy more, and time bails you out. Once you retire, the machine runs in reverse. Every withdrawal in a down market sells more shares to raise the same cash, and those shares are gone when the recovery comes. Two retirees can earn the same average return and end up hundreds of thousands of dollars apart, decided by nothing but timing.

How the Defense Works

Researchers call the ten years around your retirement date the risk zone, because losses there do lasting damage. The defenses are not fancy. Hold a few years of spending in cash and short bonds so a down year never forces a stock sale. Stay flexible, since trimming spending in a bad year does outsized good. And keep the withdrawal rate you need low, which is where Ohio quietly helps. A flat 2.75 percent state tax, no state tax on Social Security, and a cost of living well below the coasts mean an Ohio retiree simply needs to pull less to live the same life.

A Simple Example

Dan and Sue retired in Westerville last fall, both 64, with $1.3 million and about $60,000 a year coming from the portfolio until Social Security starts. If stocks fell 25 percent in their first two years and they kept withdrawing on autopilot, they would be selling shares at the worst possible prices, and the math says they might never fully catch back up. So the plan holds roughly three years of withdrawals in cash and short term bonds. When stocks fall, the checks come from that bucket and the stocks get left alone to recover. When stocks rise, they refill the bucket and carry on. They also agreed on one rule in advance: in any year the portfolio takes a real hit, the big trip waits. None of it is complicated. It just has to be decided before the bad year shows up, not during it.

The Whole Idea

You cannot control what the market does the year you retire, but you can decide ahead of time how you will respond. A cash buffer, flexible spending, and a modest withdrawal rate turn a rough first act into a footnote. Setting that up before you need it is the kind of thing worth having someone watch for you.

STILL WORKING? FILE THIS AWAY

Sequence risk runs backward while you are saving. A market drop in your 30s or 40s is a discount, not a disaster, because every paycheck buys shares on sale. The risk only turns against you in the last stretch before retirement, so time is still on your side. One caution though. A growing pile of company stock from RSUs concentrates your risk in a single name right when the balance is getting big enough to matter. Selling as shares vest and spreading the money out is your version of the cash bucket.

Worth a Read

What Is the Retirement Risk Zone? (Morningstar). Why the ten years around your retirement date matter most.

How to Protect Your Retirement From Sequence of Returns Risk (Kiplinger). Practical defenses, explained clearly.

Morningstar's 2026 Retirement Withdrawal Advice: Will It Work for Investors? (Kiplinger). The new 3.9 percent starting withdrawal number and the debate around it.

Sequence of Returns Risk (Bogleheads Wiki). The plain math, from the do it yourself crowd.

If this issue raised a question about your own numbers, reply and ask. I read every note.

Jesse Stacy MTAX, CFP®, EA

JCS Retirement Tax Advisors

This newsletter is for education only and is not tax, legal, or investment advice. Talk with a professional about your own situation before acting.