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Navigating Sequence Risk in Retirement: Lessons and Strategies for Graybar Electric Employees

'Graybar Electric employees approaching retirement should recognize that the sequence of market returns in their early years can influence the longevity of their income far more than the average return itself, making disciplined withdrawal strategies and diversified income planning essential.' – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement.

'Graybar Electric employees nearing retirement can benefit from understanding how market downturns early in retirement may have lasting effects, and from adopting flexible, research-based withdrawal and allocation strategies to help sustain their income over time.' – Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article we will discuss:

Historical examples of sequence-of-returns risk and their effects on retirement income.
Why the first years of retirement are most critical for portfolio sustainability.
Research‑backed strategies for managing sequence risk and supporting long‑term retirement goals.

Contributed by Paul Bergeron and Brent Wolf of Wealth Enhancement

For Fortune 500 employees approaching retirement, recognizing the timing of returns—not just the average return—can be critical to keeping income going over the long term. This concept, known as sequence-of‑returns risk, shows how poor early market performance in retirement can have a lasting impact on a withdrawal plan, even if long-term averages seem strong. Historical market data provides clear examples of this risk and offers practical methods for responding to it.

Historical examples of sequence risk

Fortune 500 retirees entering retirement during tough market cycles face situations similar to the declines seen in the late 1960s, when the market hit two bear markets (1968–70 and 1973–74) alongside high inflation. The S&P 500 dropped roughly 48% during the 1973–74 bear market, compounding inflation-related difficulties. ¹ Likewise, those retiring in 2000 endured two severe bear markets in the decade, while 2022 proved one of the toughest years for balanced portfolios, with sharp drops in both U.S. stocks and high-quality bonds.

Why the early years matter most

For a Fortune 500 retiree, significant losses in the first five to ten years of retirement—combined with regular withdrawals—can shrink the number of shares left to rebound when markets recover. Academic studies and industry research repeatedly show that even with the same average return, the order of gains and losses plays a huge role in retirement outcomes.

Research-backed strategies to manage sequence risk

One effective method for Fortune 500 retirees is keeping a mix of asset types to help weather downturns. Cash and bonds can act as “shock absorbers” for immediate expenses, reducing the need to sell stocks during market dips. Flexible withdrawal approaches—such as adjusting withdrawals within set guardrails—have been shown to support portfolio longevity better than fixed-dollar withdrawal methods.

Staging risk in a retirement portfolio—by holding one to two years of expenses in cash-like assets and several years in short‑ to intermediate‑term bonds—may give equities time to recover before they're tapped for income. For some Fortune 500 retirees, delaying income sources like Social Security can help raise total lifetime income and lessen the need to tap investments during volatile times. Thoughtful rebalancing and managing tax lots, especially during downturns, can also help maintain equity exposure and extend portfolio lifespan.

Implications for retirement planning

While higher stock allocations may offer greater long-term growth potential, they also increase sequence risk in early retirement for Fortune 500 workers. Historically, balanced portfolios—often with 30% to 50% equities for income-focused funds—have supported more resilient initial withdrawal rates compared to all-stock strategies. ² Strong early-market results can set up long-term success, but disciplined spending limits, guardrails, and rebalancing remain key.

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Sources:

1.The New York Times. ' What Happens When Stock Markets Become Bears ,' by William Davis, Karl Russell, and Stephen Gandel. 13 June 2022.

2. Vanguard UK. ' Sustainable Spending Rates in Turbulent Markets ,' by Daga, Ankul, et al. Mar. 2021, pp. 1–7.

Other Resources:

1. Guyton, Jonathan T., and William J. Klinger. “ Decision Rules and Maximum Initial Withdrawal Rates .” Journal of Financial Planning , vol. 19, no. 3, Mar. 2006, pp. 48–50, 52–54, 56–58. Financial Planning Association.

2. “ Timeline of U.S. Stock Market Crashes .” Investopedia , 30 Oct. 2024, section “The 1973–74 Oil Crisis Bear Market.”

3. ' When to Start Receiving Retirement Benefits. ' Social Security Administration, Pub. No. 05-10147, May 2024, pp. 1–2.

4. Arnott, Amy C., CFA, and Ivanna Hampton. “ Why More Diversification Doesn’t Mean Better Returns .” Morningstar , 7 June 2024.

What steps must an employee take to ensure they accurately calculate their pension benefits when planning for retirement under the Electricians Pension Plan, IBEW 995? Employees need to understand the various factors that contribute to benefit calculations, including years of service credits, age, and any early retirement reductions. Participants should also familiarize themselves with the formulas outlined in the plan regarding Normal Retirement and Early Retirement benefits.

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How does the Electricians Pension Plan, IBEW 995, treat periods of active service compared to breaks in service when determining eligibility for pension benefits? Employees should be aware that their length of service is critical to establishing eligibility, and any periods identified as breaks in service may impact their pension status. Understanding the definition and implications of breaks in service can be vital for maximizing retirement benefits.

Service periods under the Electricians Pension Plan, IBEW 995 are critical for pension eligibility and accrual. Breaks in service, defined as periods where an employee is not credited with at least 250 hours in a plan year, can disrupt benefit accrual and participation. However, the plan provides grace periods for specific situations such as disability or maternity, preventing these gaps from affecting eligibility(Electricians_Pension_Pl…).

What are the implications of returning to work after starting to receive benefits under the Electricians Pension Plan, IBEW 995, and how can it affect ongoing pension payments? It's important for employees to recognize the conditions classified as "Disqualifying Employment" that can lead to suspending their pension benefits. Knowing how working while receiving benefits influences the plan can help retirees make informed decisions about their post-retirement employment.

Returning to work after starting to receive benefits under the Electricians Pension Plan, IBEW 995 can result in a suspension of benefits if the work qualifies as "Disqualifying Employment." Employees should check the plan’s definitions to see if their employment will affect their pension payments. Generally, working over 40 hours per month in covered employment or similar trades can trigger a suspension(Electricians_Pension_Pl…).

In what ways can an employee's spousal status influence the benefits they receive from the Electricians Pension Plan, IBEW 995? Employees need to understand how their marital status affects pension distributions, including survivor benefits and waivers. This knowledge is crucial for planning, as certain benefit structures depend significantly on whether the participant has a qualified spouse.

Spousal status significantly affects the distribution of benefits under the Electricians Pension Plan, IBEW 995. If an employee is married, the default pension option is the Joint and Survivor Annuity, which provides a continued payout to the spouse upon the participant’s death. The plan also outlines the necessary waivers and consents required for changing these benefits based on marital status(Electricians_Pension_Pl…).

How do changes in the Internal Revenue Service (IRS) regulations affect the contribution limits and benefit payouts related to the Electricians Pension Plan, IBEW 995? Employees should keep informed on the most current IRS guidelines, as they directly influence how benefits are calculated and dispersed. Awareness of IRS limits can prevent unexpected tax penalties and ensure compliance with pension law.

IRS regulations play an important role in determining contribution limits and payout structures under the Electricians Pension Plan, IBEW 995. Changes to IRS rules may affect the maximum allowable benefits and tax treatments. Employees should keep up to date with IRS guidelines to avoid potential tax penalties and ensure their pension plan remains in compliance(Electricians_Pension_Pl…).

What documentation is required for employees to maintain their eligibility for pension benefits under the Electricians Pension Plan, IBEW 995, especially after significant life events such as marriage, divorce, or disability? Employees must notify the plan office of life changes and provide necessary documentation. Understanding what these documents are and how they should be submitted is crucial for maintaining eligibility and accessing benefits.

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What processes are in place for employees to appeal a denial of benefits under the Electricians Pension Plan, IBEW 995, and what timelines must they adhere to? Employees should be aware of their rights under ERISA concerning claims and appeals, including the time limits for submitting appeals. This knowledge ensures they are equipped to address any potential issues they may encounter during the pension claim process.

If a claim for benefits is denied, the Electricians Pension Plan, IBEW 995 provides an appeals process. Employees must file a written appeal within 60 days of receiving the denial notice. The appeal should include any relevant documentation, and employees should follow the timeline and procedures outlined in the plan to ensure proper consideration of their case(Electricians_Pension_Pl…).

How can employees determine if their employer is meeting its financial obligation to the Electricians Pension Plan, IBEW 995, particularly regarding contributions? Understanding the mechanisms for verifying employer contributions can help employees ensure that they are accruing the appropriate benefits. Employees should know whom to contact and what reports they can access to gather this information.

Employees concerned about their employer meeting its contribution obligations to the Electricians Pension Plan, IBEW 995 can contact the plan’s administrative office for verification. The plan allows participants to access contribution reports to confirm that employers are properly crediting their accounts(Electricians_Pension_Pl…).

What resources are available through the Electricians Pension Plan, IBEW 995, for employees seeking to enhance their understanding of their retirement options and benefits? Employees should seek detailed information provided through the plan documents and know how to access educational resources, such as workshops or one-on-one sessions with plan administrators. Utilizing available resources ensures they are making informed decisions about their retirement.

The Electricians Pension Plan, IBEW 995 offers various resources to help employees understand their retirement options. These include the plan’s summary description, workshops, and individual consultations with plan administrators. Employees should make use of these tools to gain a clear understanding of their pension and plan effectively(Electricians_Pension_Pl…).

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For additional questions or clarification regarding the Electricians Pension Plan, IBEW 995, employees can contact the plan's administrative office at the provided phone number or address. The office offers support for all queries related to pension benefits, eligibility, and documentation(Electricians_Pension_Pl…).