You reach your FIRE Number and shift from accumulation to decumulation. From that day on, a crash is no longer a buying opportunity: it is a forced sale. If the drop comes in the first 5 to 10 years, you liquidate shares at the worst possible price to cover your spending. Those shares never participate in the recovery. That is the sequence of returns risk, and it can sink a plan that was perfectly calibrated on the average.
During accumulation, a crash lets you buy cheaper. It is a gift. During decumulation, the math reverses: to cover your $40,000 for the year, you sell more shares when the market is down 30%. In practice, you liquidate 1.4× more shares for the same check. Those shares sold near the bottom never participate in the recovery. The effect is asymmetric and irreversible.
The good news: sequence risk is concentrated in the first 5-10 years of retirement. After that, if your capital has survived, growth takes over.
Identical starting capital ($1,000,000), identical withdrawal ($40,000/year), identical 7% average return over 20 years. Alice strings together two good years (+25%, +15%) before a crash in year 10. Bob starts with -30% and -10%, then the same good years arrive later. After 20 years: Alice ends at $1,200,000, Bob at $350,000. Same average, an $850,000 gap.
Average return on its own is misleading. Two portfolios averaging 7% can finish with a 3× factor between them. That is why Monte Carlo is essential in decumulation: the method tests thousands of possible sequences and returns a success rate, not an average. A FIRE plan that has not been stress-tested in Monte Carlo is not a plan, it is a bet on luck.