Dollar cost ravaging can occur if households experience poor returns early in retirement, just as they are beginning to spend their retirement portfolio. The bottom chart shows the sequence of returns experienced by a 40% equity and 60% bond portfolio from 1966 to 1995. During that time period, below average and negative returns were experienced in the first 10 years. The top chart shows the outcome of two spending scenarios. The smooth green line represents the portfolio value assuming that the household withdrawals 5.2% of their initial portfolio and increases each year’s withdrawal by inflation, regardless of how their portfolio performs. The green line with symbols illustrates a dynamic spending strategy in which the household grows their withdrawal by inflation in periods of normal returns. They do not give themselves a raise after a year of poor market returns and give themselves a little more of a raise after a year of outperformance. By adapting their spending based on how their portfolio is performing, the household is able to meet their spending needs for the entire 30 years, and spend about 14% more in total in today’s dollars.