Over the years, there have been a lot of studies on timing the market. Most market timing studies focus on people who are still working and ask a simple question: When is the best time to invest?

But when you retire, the stakes change.

Once you stop contributing and begin withdrawing from your portfolio, the rules are different.

To illustrate this, let's look at three different withdrawal scenarios and see how when and where you take retirement income can significantly impact your long-term results.

Setting the stage

A common way to study market timing is to compare how different contribution strategies affect long-term results. To illustrate this, we'll follow three hypothetical investors: Sam Pole, Exam Pole, and Norm Pole.

All three investors are going to add $1,000/month into the S&P 500 from January 2000 through December 2025.

Note, this example is for illustrative purposes only. We’re not advocating that someone adds all their money into the S&P. of course, you should consult a CERTIFIED FINANCIAL PLANNER to determine what investment policy is appropriate for you. We’re also not planning on giving tax and legal advice here, either. Really, these examples are for education, trying to grasp a topic. Actual results may vary.

CFP Board owns the marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design) in the U.S.

First, meet Sam Pole, the unluckiest investor imaginable. Every month, as he contributes $1,000, he somehow manages to invest on the highest trading day of the month. Remarkably, he maintains this streak of terrible timing for more than 25 years. Poor Sam.

Next is Exam Pole, who has impossibly good timing. Every month, her $1,000 contribution lands on the lowest trading day of the month. Somehow, she repeats this feat month after month for more than 25 years. We all know the saying “buy low, sell high”. Exam is buying low. Sam is buying high.

Last is Norm Pole, who represents most investors. He isn't trying to time the market at all. Like many people with a workplace retirement plan, his $1,000 contribution is automatically invested on the same day every month when he gets paid.

As you contribute

So the stage is set. From January 2000 – December 2025, all three investors from our example are going to put in the same amount of money: $1,000 month. That’s $312,000 total.

Who do you think will win? Unlucky Sam , Lucky Exam, or your Typical Norm?

If you guessed Exam, you’re right. But you might be surprised by how little you were right.

Figure 1 1

As you can see, Exam comes out ahead. Her rate of return is 9.83% on average. She ends up with $45,216 more than Norm, and $81,858 more than Sam.

But looking at the results, on average:

Exam’s rate of return was 9.83%
Norm’s rate of return was 9.62%, and
Sam’s rate of return was 9.44%.

That’s pretty surprising.

Sam had the worst luck possible, and his average annual rate of return was only 0.39% less than Exam’s perfect timing.

Most likely, nobody can land on Exam’s perfect timing. 

So when I see this I don’t think Exam’s perfect timing is that impressive.

After retirement 

At retirement, now that you start to take withdrawals, life is completely different.

Let’s take those same people: Sam Pole, Exam Pole, and Norm Pole, and put them into a retirement scenario. 

Now, each one of them is going to withdrawal $3,000/month, starting with $1,000,000 in January 2000 and live through December 2025:

Sam Poleis going to withdraw $3,000/month on the best trading day of the month.
Exam Pole is going to withdraw $3,000/month on the worst trading day of the month.
Norm Pole is going to withdraw $3,000/month on the first trading day of the month.

The results are wild.

Figure 2 2

At the end of this period, we start seeing a wide difference in account balances.

Exam Pole ends up with $245,575 more than Sam, and $109,926 more than Norm. That’s a substantial difference.

It's also important to note that this analysis assumes a relatively modest withdrawal of $3,000 per month, or an initial withdrawal rate of 3.6%.

If we instead assumed a 4% initial withdrawal rate—or $4,000 per month (which, by the way, we don't necessarily recommend as a one-size-fits-all strategy)—the differences in ending account values become even more pronounced.

The reality

This is a phenomenon we talk about a lot: the Sequence of Return Risk.

Sequence of Return Risk is a big deal. When you take your withdrawal, how much you take, and where you take it from make a huge impact.

We also know that the S&P 500 is volatile, which means it goes up and down a lot. During this 2000-2025 year time period, we saw a lot of drawdown in the market:

Figure 3 3

It's difficult to stick with an investment strategy during extended market downturns. That's why most retirees don't rely solely on the S&P 500. Instead, they typically own diversified portfolios that include bonds and other fixed-income investments, which often respond differently than stocks and can help cushion the impact of market volatility.

A typical investor may also hold international investments or non-S&P 500 investments, not to mention real estate, precious metals, derivatives, or cash. In most market cycles, it’s a good investment philosophy to be diversified. 

When you have multiple asset classes, and likely even multiple accounts, you then would need to decide which account to withdraw from, which assets should you pull from, and when to pull the withdrawals.

Investment management matters.
Sequence of returns risk matters.
Having a plan matters.

This shows why working with a financial planner is so important. The difference of $245,575 and $109,926 is staggering.

Ready to Build a Retirement Income Strategy?

Accumulating wealth is only half the journey. Creating a thoughtful withdrawal strategy can have just as much, if not more, impact on your long term financial success.

If you're approaching retirement or have already started taking withdrawals, we'd be happy to help you evaluate your retirement income plan, manage sequence of returns risk, and develop a tax efficient withdrawal strategy tailored to your goals.

Schedule a complimentary consultation with an IWM Financial advisor to learn how a coordinated retirement income strategy can help you make the most of the assets you've worked so hard to build. https://www.iwmfinancial.com/call

1. Retrieved from FRED, Federal Reserve Bank of St. Louis: S&P Dow Jones Indices LLC, S&P 500 [SP500]. https://fred.stlouisfed.org/series/SP500, and
   Yahoo Finance, S&P 500 Index (^GSPC) daily historical prices, via public archive

2. Retrieved from FRED, Federal Reserve Bank of St. Louis: S&P Dow Jones Indices LLC, S&P 500 [SP500]. https://fred.stlouisfed.org/series/SP500, and
   Yahoo Finance, S&P 500 Index (^GSPC) daily historical prices, via public archive

3. S&P Dow Jones Indices LLC, S&P 500 [SP500], retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/SP500