Compare the order of returns during withdrawals
See this course’s project requirements
A fictional retirement-income model with spending gap, withdrawal scenarios, inflation, return-order comparison and dated rule questions.
Keep your working files in your own notebook or software. Save a private description, checklist, and work link in My Proof.
What to include
- An income/spending map with an annual and monthly gap.
- A one-year withdrawal roll-forward and conditional rate explanation.
- An inflation-adjusted spending table with category limits.
- A return-order stress table and sequence-risk explanation.
- A gross/net withdrawal worksheet and dated rule-verification list.
- A retirement scenario packet and spending-review policy.
Review and revise
Use these criteria to check your work and choose what to improve.
- All supplied records reconcile and the decision uses the named case rules.
- Calculations show units, intermediate values and a second check.
- Changed-input practice revises the affected result and identifies uncertainty.
- The final project combines six lesson records, separates fictional assumptions from current rules, and states a supported next step.
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The idea in everyday life
This is an original fictional practice case. No account, payment, personal record or outside participation is required. Opening $100,000; withdraw $10,000 at each year start. Path A returns −20%, then +25%; path B +25%, then −20%. Ignore fees/tax.
Without withdrawals, multiplication is order-independent; with fixed draws, early losses can leave less capital for later recovery.
Compare the order of returns during withdrawals — worked practice
Without withdrawals, multiplication is order-independent; with fixed draws, early losses can leave less capital for later recovery.
Use paper or a local table; label all amounts as fictional USD unless the case names another unit. Opening $100,000; withdraw $10,000 at each year start. Path A returns −20%, then +25%; path B +25%, then −20%. Ignore fees/tax.
Return-order comparison
Paste at A1.
| APath | BOpening USD | CWithdrawal at each year start USD | DYear-1 return percent | EYear-2 return percent |
|---|---|---|---|---|
| A | 100000 | 10000 | -20 | 25 |
| B | 100000 | 10000 | 25 | -20 |
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1. Step 1: Calculate A after year 1
Calculate A after year 1.
You should see: (100000−10000)×0.8=$72,000.
Without withdrawals, multiplication is order-independent; with fixed draws, early losses can leave less capital for later recovery.
2. Step 2: Calculate A after year 2
Calculate A after year 2.
You should see: (72000−10000)×1.25=$77,500.
Keep this intermediate result so the final decision can be checked.
3. Step 3: Calculate B in the opposite order
Calculate B in the opposite order.
You should see: Year1 $112,500; year2 (112500−10000)×0.8=$82,000.
Keep this intermediate result so the final decision can be checked.
4. Step 4: Explain the $4,500 difference
Explain the $4,500 difference.
You should see: Same two returns, different order under withdrawals; without withdrawals both paths end $100,000.
Keep this intermediate result so the final decision can be checked.
What to finish
A return-order stress table and sequence-risk explanation.
Watch for this
Assuming identical average returns imply identical balances during withdrawals.
How can I tell I understand it?
Compare two specified return sequences with identical start-year withdrawals on the supplied changed case while preserving the stated rule and checking the final record.
Quick knowledge check
Answer all 3 questions. Get at least 2 right and the lesson completes automatically.
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Answer all 3 questions above and get at least 2 right. You can review the explanations and try again.
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Source & access notes · checked 2026-10-01
Official page opened/read during Money expansion authoring; checked the relevant concept and access state. These sources do not establish funding eligibility.
Access: Readable official webpage inspected with the web reader on 2026-10-01. No interactive-tool operation is claimed.
Reuse: Original fictional practice, questions and calculations; paraphrased concepts with a source link. No source exercise copied.
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