Sequence Risk Isn’t Just About Retirement — It’s About Career Transitions

Why leaving clinical medicine can amplify volatility — even if your math works.

Sequence risk is typically framed as a retirement math problem. But it’s often a life-timing problem. The real danger isn’t just poor early returns — it’s when volatility collides with income reduction and identity shifts.

Anyone familiar with me from my website, blog articles or podcast appearances knows that I am a second shifter.  "The Second Shift" is the name of a new podcast that I am co-hosting with my colleague at Targeted Wealth Solutions, Aaron Milledge.  It is about the anxieties, challenges, rewards, and mindset shifts that happen when anyone leaves a high impact career and moves into something else.  (We intend to publish the podcast by the end of this month, so stay tuned.)

Over the last four years, I have experienced firsthand the very real stresses related to traditional sequence of return risk.  Four years ago, the market crashed just as I was considering retiring from medicine.  It would have been a bad time to start selling investments, a move that I might not have fully recovered from.

But I was burnt out from medicine.  So, what was I to do?

That is when my pragmatic brain kicked in and helped overcome the emotions that I was feeling. I created an exit ramp that is now about to become fully realized.  As I write this article, I am about to complete my final two shifts in the emergency department.  I am also now a full-time financial planner with a growing second career and don’t intend to retire fully from the workforce anytime soon. 

So how did I get from point A to point B and what does it feel like now to step away from medicine entirely?

My career transition

When the market dropped in 2021, and after acknowledging the emotions that it triggered, I decided that it was time to get out of medicine. But I wanted to do it on my own terms and didn't feel like I was mentally ready to be done working. I just wanted to spend my work hours in a different way.

So, I considered career transition options and decided that I could use this moment as an opportunity to explore passions outside of medicine and see where that led.  The short version of the story is that I went back to school, got a master's degree in finance which led to a Certified Financial Planner® certification, a Chartered Special Needs Consultant® certification, and a job with Targeted Wealth Solutions as a financial planner. 

Over the subsequent years since making that initial decision, I slowly and purposefully tapered down the number of shifts that I was doing in the emergency department.  The taper and the stimulation from learning a new career mitigated a fair amount of the stress from my medical career and allowed me that prolonged off-ramp.

Now, I am a full-time planner and am sitting on my final shifts as a doctor.  How does that feel?

If I’m being honest, it still gives me some anxiety.  Why? 

As a financial planner, I have run my own financial plan a hundred times with a lot more sophisticated knowledge and tools than I had as a DIY-investor doctor contemplating retirement four years ago.  And guess what? My probability of success is very robust.  And yet, as I pull the plug on my medical career, the voice in my head keeps telling me to pick up a locums contract, “just in case.” 

As I dove further into my own psychology around this moment, it led me to redefine Sequence of Returns Risk (SORR) where it is not just about math and financial risk but about emotions and life volatility that happen during major life transitions. We could refer to it as Life Sequence Risk. 

The Classic Definition of Sequence Risk

Traditionally, SORR describes the potentially permanent impact on your long-term portfolio by the unlucky timing of a market downturn coinciding with your early years of retirement.   

Here is a quick example:

Let’s look at two retirees with $4 million portfolios who plan on using a 4% safe withdrawal rate.  Retiree A experienced a 25% market decline in year one of retirement.  Retiree B enjoys a 15% market positive market return in year one.  After that first year, both average 6% per year for the duration of their retirement. What is each of their portfolios worth in 10 years? 20 years?

The answer:  Retiree A’s net worth is $3.53 million at year 10 and $4.31 million at 20 years.  Retiree B is worth $5.79 million in year 10 and $7.82 million in year 20. 

That’s a huge difference due to sheer bad luck. 

Let's make the comparison truly apples-to-apples and say that each retiree has a year with a 25% drop and a year with a 15% gain and the only difference is in the timing. The drop happens in year one and the gain in year 10 for Retiree A and the opposite for Retiree B. In this scenario, the difference is not as stark but still approaches $1 million by year 20.

Same withdrawal rate. Same long-term average return. Only the order changed.

If you are retiring without much cushion, the differences could make or break your retirement success rate.  Again, no fault of your own.  Just bad timing.

 

What is Life Sequence Risk, or maybe, Career Transition Sequence Risk?

Back to my situation: If the numbers on my spreadsheet look good and there appears to be plenty of cushion and optionality, why am I still feeling financial anxiety about the career transition? 

I think there are three main factors:

1.       Shifting from Net Saver to Net Spender

I have been a saver for my entire adult life, at least since graduating from medical school.  Some of that is driven by growing up in a family without any financial cushion and parents who were strict budgeters by necessity.  I think that psychology rubbed off, even when I was able to loosen the purse strings. 

There is positive reinforcement for savers in seeing their net worth grow.    How will it feel if and when it starts to shrink, even if it is temporary?  I can feel the mental struggle and realize that it is just going to take some getting used to and some talking myself down when it happens. 

2.       Loss of Income Control

Throughout my emergency medicine career, my cash flow has been fully dependent on how hard I worked, how many shifts I did, and what kind of shifts I picked up.  The solution to any financial stress was simple: work more.  That made it so much easier to absorb life’s pitches and turns.  But I am about to shut down the easy button.  Now when I need extra income, it involves either spending down my assets or building my financial business which takes time. 

So, my brain immediately goes to the “but, what if . . .” trap.  What if the market takes a big downturn AND my ability to generate cash quickly goes away at the same time.  That emotional impact feels double. 

3.       Loss Aversion Near Inflection Points

Research studies have shown that losses hurt about twice as much as wins feel good.  I think when it is near life’s pivots, it might even be compounded because you have given up some of the capacity to overcome those losses.  Not to mention that when you are in or approaching retirement, your portfolio is much larger than it was earlier in your career and your time for it to recover is much less.  A 20% loss may represent over a million dollars, compared to tens of thousands earlier on.  It is hard to look at percentages at that point and not real dollars.  You remember how hard it was to save that first million. 

Lifetime sequential risk isn’t just related to retirement

The anxieties that I mentioned above are not just for full retirees, although it is magnified for them.  It can happen in any career transition where your income sources shift. So, it is something that we will all likely face more than once throughout our lives.

Think about these applicable scenarios:

• Physicians scaling back.

• Leaving full-time clinical work.

• Selling a practice.

• Moving from W2 to business income.

• Starting a second career.

 

Why the Risk Is Often Overestimated

So, here is the good news.  If you are well-prepared with a good financial and transition plan, you can remind yourself that what you are feeling are more likely emotions rather than a scary potential reality.  For many late-career physicians with liquidity buffers, tax diversification, and flexible spending, the structural risk of catastrophic failure is often much lower than the emotional response suggests.

There are some important planning tools that can help buffer that anxiety.  Here are some examples:

• Liquidity buckets (1–3 years)

• Taxable accounts before retirement accounts

• Part-time optional income

• Roth conversion flexibility

• Being within 5 years of penalty-free access

• Lower spending than during peak earning years

  
  

The 5-Year Transition Window

The five years before a major career transition may be the most important planning window of your financial life. 

You may have to face situations when we don’t get the opportunity to plan ahead: sudden injury or illness, loss of a job, divorce, needs of an immediate family member.  For those, we need to be sure that we have adequate insurance or backup plans to cover any financial impact from those events.  But for most of us, we get to plan.  And if you know or feel that you are within 5 years of a significant transition, here are some key planning priorities: 

• Build liquidity runway.

• Stress test for 30–40% drop in year one.

• Decide ahead of time what you will do in that scenario.

• Separate business runway from investment portfolio.

• Clarify whether income scaling is strategic or fear-based.

  
  

The Hidden Benefit of Downturns During Transitions

Remember that life is full of transitions.  Transitions aren’t inherently bad.  In fact, they can often be moments of great growth and opportunity.  Yet I think it is very natural to feel some anxiety surrounding them and it may be nearly impossible to remove that entirely. But if you expect it, you can prepare for it.  Good financial planning can help. Some behavioral coaching or at least talking with a mentor who has been through it can also help. 

The real risk isn’t the volatility. It’s reacting to volatility in a way that pulls you back into a life you were ready to leave.

Life volatility does not have to just endlessly muddy the waters but can actually accelerate clarity if you approach it with the right mindset and a good team to back you up.  It forces you to prioritize your values and decide what you want your life to look like moving forward.  And that is a powerful motivating force that might ultimately lead you to a far better place.

 

Closing Thought

I am living the final chapter of my own major life transition and naturally feeling some trepidation, coupled with excitement and momentum.  Why the anxiety?  Because there is risk involved.  Life is full of it.  You can never full control what is going to happen next.  But you can do your best to prepare for it and learn to adapt through your next adventure, just like you have during all the adventures that have come before. 

Sequence risk is not just a math problem. It’s a life-timing problem and the goal isn’t to eliminate volatility.  Life without it would be stagnant (by definition), and boring, if you ask me. The goal is to design enough optionality within your life plan so you don’t have to react to it in a negative way.

If you are within five years of stepping away from full-time clinical work, ask yourself:

• Have I built enough liquidity to weather a bad first year?

• Have I stress-tested my plan for a 30–40% decline?

• Have I defined in advance how I will respond to volatility?

• Am I staying one more year because it improves my plan — or because it quiets my anxiety?

  
  

Sequence risk is rarely just about markets. It’s about how prepared you are — financially and psychologically — for what comes next.

If you would like help navigating this transition, I’d love to have that conversation with you.  Reach out to us at www.targetedwealthsolutions.com.

Disclaimer: the material in this blog post is intended for general educational purposes only and should not be considered specific financial advice. You should always consult with your personal financial advisor to see how it might fit within your personalized financial plan.