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How do I Model a Bear Market or Sequence of Returns Risk?
How do I Model a Bear Market or Sequence of Returns Risk?

This article describes a method for modeling a Bear Market in NewRetirement

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

One of the risks many individuals fear in retirement is a market loss as they approach or enter retirement. The NewRetirement Planner does not currently account for negative returns in the Accounts section. However, the Planner does have a Monte Carlo simulation driving your Chance of Success which accounts for negative returns because it models variability and negative returns are very possible.

If you would like more manual control, one option would be to model a "disbursement' from an account at a specific date. This may have tax consequences so you may want to select "deductible" for the disbursement.

Example: If you have a $1,000,000 401k and you want to view the impact of a 30% market loss you may want follow these steps:

STEP 1: Create a new Scenario

STEP 2: Navigate to My Plan > Expenses and Healthcare > Disbursements

STEP 3: Press Add a Disbursement

STEP 4: Enter a Disbursement for the desired account

STEP 5: When asked "Is this disbursement tax deductible?" select Deductible

STEP 6: Add detailed notes

STEP 7: Press Save

Step 5: Navigate to Scenario Management and use the Scenario Comparison feature to compare the scenario under your Pessimistic, Average and Optimistic Assumptions as well as with your Baseline and other scenarios.

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