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Navigating Sequence Risk in Retirement: Lessons and Strategies for Matson Employees

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'Matson 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.

'Matson 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 type of retirement plan does Matson offer to its employees?

Matson offers a 401(k) retirement savings plan to its employees.

Does Matson provide any employer match contributions to the 401(k) plan?

Yes, Matson offers an employer match on employee contributions to the 401(k) plan, subject to certain limits.

What is the eligibility requirement for Matson employees to participate in the 401(k) plan?

Employees of Matson are typically eligible to participate in the 401(k) plan after completing a specified period of service, which is outlined in the plan documents.

Can Matson employees make pre-tax contributions to their 401(k) accounts?

Yes, Matson employees can make pre-tax contributions to their 401(k) accounts, reducing their taxable income.

Are there any Roth contribution options available in Matson's 401(k) plan?

Yes, Matson offers a Roth 401(k) option, allowing employees to make after-tax contributions.

What investment options are available in Matson's 401(k) plan?

Matson's 401(k) plan includes a variety of investment options, such as mutual funds and target-date funds, allowing employees to choose according to their risk tolerance.

How often can Matson employees change their contribution amounts to the 401(k) plan?

Matson employees can change their contribution amounts to the 401(k) plan on a regular basis, typically during open enrollment periods or as specified in the plan guidelines.

What is the vesting schedule for Matson's employer match contributions in the 401(k) plan?

The vesting schedule for Matson's employer match contributions may vary, but it generally requires employees to work for a certain number of years before becoming fully vested.

Can Matson employees take loans against their 401(k) savings?

Yes, Matson allows employees to take loans against their 401(k) savings, subject to the terms and conditions of the plan.

What happens to Matson employees' 401(k) accounts if they leave the company?

If Matson employees leave the company, they have several options for their 401(k) accounts, including rolling over the balance to another retirement account or leaving it with Matson.