A portfolio’s investment return will vary year to year. How does this variation affect retirement outcomes? The bottom chart shows three very different return scenarios. The first in blue is a great start/bad end scenario. The bad start/great end shown at the bottom in green is exactly the same “sequence of returns” but reversed with a poor first 5 years and great final 5 years. The average of both of these sequence of return scenarios is 5% – meaning a 5% average annual return over 30 years. For illustrative purposes, we’ll also look at a scenario in which that average return was achieved each and every year – the “steadily average” scenario in gray. The top chart shows the effect of these different return scenarios on a $100,000 lump sum investment. All three sequence of return scenarios result in a $432,200 portfolio after 30 years. This shows that in lump sum situations (no cash flows), the average return over the time period will drive the outcome, not the sequence in which that return was experienced.