Leveraged Financial Turning Prosperity into Permanence

Same Returns. Completely Different Retirements.

Average return does not tell the whole story. See what can happen when losses occur during the first few years of retirement instead of the last few.

Client Retirement Stress Test

Build the current portfolio, model a protected repositioning, and compare both plans across paired Monte Carlo trials.

CLIENT-SPECIFIC ILLUSTRATION

1. Current Portfolio · Scenario A

2. Proposed Volatility Buffer · Scenario B

Scenario A · Current Portfolio
The client’s accounts and current risk exposure remain unchanged.
Scenario B · Proposed Repositioning
No repositioning configured yet.
Scenario A · Current Portfolio
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Scenario B · Volatility Buffer
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Educational Monte Carlo illustration only. Results are hypothetical, depend on the assumptions entered, and are not guarantees, carrier illustrations, or investment, tax, or legal advice.

Historical Sequence Illustration

Portfolio withdrawals remain $0 until this age.
Return Timeline
Historical total returns include dividends. Source: Aswath Damodaran, NYU Stern.
Volatility Buffer Method
Compare the market portfolio with a 50% protected allocation.
Sequence comparison: the selected returns are shown chronologically versus in reverse order.
Scenario A · chronological
Scenario B · exact reverse
Bad Years First
Bad Years Later
Protection Comparison
Withdrawal Settings
Accounts
Outside Income Offsets
One-Time Withdrawals
Return Sequences
▶ Random Generator
Generate Hypothetical Sequence
▶ Random Generator
Generate Hypothetical Sequence
Ending Balance
Scenario A
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Scenario B
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Depleted At
Scenario A
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Scenario B
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Total Income Delivered
Scenario A
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Scenario B
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Income Shortfall
Scenario A
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Scenario B
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Arithmetic Avg Return
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same for both scenarios

Educational illustration only. Not investment, tax, or legal advice, and not a recommendation to buy or sell any product or security.

Year-by-Year Detail
Scenario A — Bad Years First
Yr Age Return % Credited % Start Balance Outside Income Withdrawal Fees End Balance Shortfall
Scenario B — Bad Years Later
Yr Age Return % Credited % Start Balance Outside Income Withdrawal Fees End Balance Shortfall
Assumptions & Methodology

Monte Carlo Comparison

The client stress test uses three-year block bootstrapping from the displayed 1984–2023 S&P 500 total-return history. Scenario A and purple Scenario B receive the same market path in every trial. Market-risk accounts receive the full sequence deviation around their entered average return; low-risk accounts receive 35% of that deviation subject to their entered floor; emergency accounts receive their entered fixed rate. Contributions are added annually before retirement, income grows with inflation, and risk assets are used before emergency reserves. A trial passes only when all requested income is delivered and the minimum reserve and legacy goals remain at the end.

Inflation-Adjusted Withdrawal

scheduledWithdrawal[y] = initialWithdrawal × (1 + inflationRate)^y

Withdrawals grow each year to maintain purchasing power based on the entered inflation rate.

Account Crediting by Treatment

  • Market: creditedReturn = enteredAnnualReturn
  • Index: Cap / Par Rate: credited = clamp(return × parRate% − spread%, floor%, cap%). ParRate 100 = full index. Leave cap/floor blank for no limit.
  • Index: Performance Trigger: if index > 0 → trigger rate credited; otherwise → floor (typically 0%). Binary outcome regardless of how much the index rose.
  • Index: Inverse Trigger: if index < 0 → trigger rate credited; otherwise → floor. Profits from down years.
  • Fixed: creditedReturn = fixedRate (ignores market returns)
  • Cash: creditedReturn = cashYield (or 0 if not entered)

Fee Convention

valueAfterReturn = investableBalance × (1 + creditedReturn)
fee = max(0, valueAfterReturn × expenseRate)
endBalance = max(0, valueAfterReturn − fee)
Fees are applied after return, on the post-return value.

Withdrawal Timing

Beginning of year: Withdrawal is taken before returns are applied. End of year: Returns are applied first, then withdrawal is taken.

Important Notice

Floor, cap, participation rate, and spread values are simplified hypothetical crediting mechanics for educational illustration. They are not carrier illustrations and do not represent any specific indexed annuity, product, or strategy.

Hypothetical examples are not forecasts. Past performance does not guarantee future results. Floor and cap values shown are illustrative and are not carrier illustrations. Leveraged Financial Group has no affiliation with OPM, TSP, SSA, or the IRS. This tool is for educational purposes only and does not constitute investment, tax, or legal advice, or a recommendation to buy or sell any product or security. Before implementing any strategy, consult with your own tax advisor, attorney, or licensed financial adviser.

Why the Order of Returns Matters in Retirement

During the accumulation phase — when you are saving and adding to a portfolio — the sequence of returns has little long-term impact. Good and bad years average out over decades of contributions. But retirement is fundamentally different. Once you begin withdrawing money, a sharp market decline in the first few years forces you to sell shares at depressed prices. Those shares can never recover their position in your portfolio, because they are gone.

This is the core of sequence of returns risk. Two retirees could start with the exact same portfolio, make the exact same withdrawals, and experience the exact same set of annual returns over 25 years — and end up in entirely different financial situations. The only difference is the order in which those returns arrived. The retiree who gets the bad years first may run out of money a decade or more before the retiree who gets the same bad years at the end.

Understanding this risk is one reason why the years immediately surrounding retirement — roughly five years before and five years after — are sometimes called the "retirement risk zone." Protecting against large losses in that window can have an outsized impact on lifetime income security. Strategies such as income flooring, bucket approaches, and conservative withdrawal rates are all partly designed to address this specific risk. The tool above is an educational illustration of the math; it is not a recommendation of any particular strategy or product.