Can Your Retirement Survive a Bad Decade?
We have not seen back-to-back down years in the S&P 500 since 2000–2002. We have certainly had some rough years since then. The financial crisis in 2008 and the selloff in 2022 are obvious examples. We have also had some massive selloffs within otherwise positive years, like the COVID crash in 2020 and the more recent volatility around Trump’s tariff policies. But each time, the negative calendar year was surrounded by positive ones.
Look at the TSX, S&P 500 and Nasdaq from 2003 through 2025. We have lived through crashes, bear markets, a global financial crisis, a pandemic and some very large drawdowns, but we still have not experienced consecutive negative calendar years in any of these three major indexes.
Think about what that means. Someone who started investing anytime during the past 20-plus years has never actually lived through two or three negative calendar years in a row while holding one of these major indexes.
Negative Calendar Years, 2003–2025 Based on Total Return
S&P/TSX Composite - 5 negative years
Nasdaq Composite - 4 negative years
S&P 500 - 3 negative years
So now think about this if you are looking to build your retirement plan. If you are building that plan around the market you have personally experienced, and most of your investing life has taken place over the past two decades, a bad year followed fairly quickly by a recovery can start to feel normal. History tells us it does not always work that way.
The last time the S&P 500 had consecutive negative calendar years was 2000–2002. From the market peak to the October 2002 trough, the S&P 500 fell roughly 49%. The tech-heavy Nasdaq-100 was absolutely crushed, losing roughly 82% to 83%.
This is where we find out how the math works against us, because losses and recoveries are not symmetrical. A 50% loss requires a 100% gain just to get back to even. But an 83% loss requires a gain of roughly 488% just to reach the break-even point.
And investors did not have to wait that long to get hit again. Just a few years after the 2000–2002 dot-com crash, the 2007–2009 financial crisis arrived. From peak to trough, the S&P 500 fell approximately 57%, making the decline faster and even larger than the S&P 500 drawdown during the dot-com crash.
Imagine retiring at the end of 1999. You would have walked almost immediately into a three-year stretch of negative S&P 500 calendar returns. The market eventually recovered, but before very long, you were staring at another major collapse during the financial crisis. That is sequence-of-returns risk in the real world.
You cannot predict when the next bad year will arrive. You do not know whether the decline will last six months or three years. You do not know whether the market will fall 20%, 40% or 50%. And even after the market recovers, you do not know whether another major downturn is waiting a few years down the road.
That uncertainty matters far more once you retire because now you are likely taking money out of the portfolio at the same time the portfolio value is falling.
If we look at some individual examples, we have seen companies such as TELUS, BCE, Algonquin Power, Suncor and RioCan suffer enormous declines from previous highs. In some cases, the share price fell 30% to 70%, and eventually the dividend was cut by 30% to 60% or more. You might not own individual stocks, but the same math applies to an ETF. If the underlying holdings are falling, cutting dividends, or not earning enough to support the payout, the ETF cannot keep paying out more than it earns forever without eventually cutting the distribution, eroding capital, or both.
Some DIY investors look at a conventional retirement plan that says they need a large amount of capital and think, why so much? Am I just trying to die with the biggest account balance possible? Is that why everything is focused on growth?
That is not really the point. The extra capital is not there because the objective is to win some contest for the largest estate. It is there because nobody knows which market you are going to retire into or what future markets will do.
A retirement portfolio needs enough growth to help keep up with inflation and support decades of increasing withdrawals, but it also needs enough room for things to go wrong. Income and returns can come in lower than expected. Dividends can get cut. Inflation can stay high for years at a time, something we have seen firsthand over the past five years. Markets can fall much further than expected, recoveries can take years, and sometimes you can get through one crisis only to run into another one a few years later, like we saw in the 2000s.
That is why hindsight can be so dangerous when talking about how much someone “really” needed to retire. Someone who retired in 2009 and then enjoyed more than a decade of strong equity markets could look back and say, “I could have retired with way less money.” And for their situation, that could be completely true.
Someone who retired at the end of 1999 might look back and think, “I wish I had waited and built a larger portfolio before pulling the pin.” They could both be right because they retired into completely different sequences of returns.
That is why the capital requirement can look high and the safe withdrawal rate can look low. Retirement planning is not built around knowing that the next 30 years will be good. It is built around the fact that you have no idea what those 30 years are going to look like. The goal is not necessarily to maximize the amount of money you die with. The goal is to give yourself a reasonable chance of funding the life you want for 30 years or more without running out of money.
It is easier for people that started earlier to build wealth. Starting later makes it harder and usually requires you to save and invest more, or maybe you have to work longer, spend less, or take on more risk. And there are no secret ETFs that only some guy on Youtube knows about that can change the math or make up for lost time.
Can you change how you receive your money, from selling shares to receiving distributions? Absolutely. Can you change the total return math so that the same level of spending can be sustainably supported with less money simply by changing the way the return is paid out? No.
You can take on more risk in an attempt to achieve a higher rate of return, which could allow you to support more spending. Of course, taking on more risk does not guarantee you will be successful. And if you take on more risk in an attempt to make up for having a smaller portfolio or to increase your spending, and you are wrong, you can end up doing even more damage.
Sustainable retirement income will depend on your total return, the sequence of those returns, inflation, fees, taxes, and how much you withdraw. Investing in growth or income assets does not change the math; it changes the packaging.
