The order in which investment returns occur is irrelevant to someone who neither adds nor withdraws. Once money is being taken out, the order becomes one of the largest determinants of how long the portfolio lasts.
Why order is irrelevant without withdrawals
A portfolio left untouched compounds the same total regardless of sequence, because multiplication does not depend on the order of the factors.
A poor year followed by a good one produces the same balance as the reverse, provided nothing was added or removed in between.
This is why accumulation is comparatively forgiving of timing, and why average return is a reasonable summary during that phase.
Withdrawals break the symmetry
Taking a fixed amount from a portfolio that has fallen means selling a larger proportion of it, because each unit sold is worth less.
Those units are permanently gone and cannot participate in any recovery, so the portfolio has less capital working when the rebound arrives.
The same withdrawal taken after a strong year removes a smaller proportion, leaving more invested, which is how identical returns in a different order produce different endings.
The early years carry the most weight
Poor returns in the first years of drawdown do the most damage because the depletion compounds across the entire remaining period.
Later losses matter less, both because fewer years remain and because a portfolio that survived a good start has more capital to absorb them.
This makes the years immediately around retirement disproportionately important relative to the decades before them, which is not intuitive.
How the risk is usually managed
Holding a portion in cash or short-dated instruments allows withdrawals to be funded from that reserve during falls, so investments are not sold at depressed prices.
Flexible spending has a similar effect, since reducing withdrawals during a downturn preserves capital at the moment preservation is most valuable.
Shifting allocation gradually around the transition addresses the same problem by reducing exposure during the window when sequence matters most.
Why fixed withdrawal rules are only a starting point
Rules expressed as a fixed percentage of the starting balance are derived from historical sequences and describe what would have survived in the past.
They embed assumptions about asset allocation, costs, time horizon and inflation, and changing any of those changes the result materially.
Treating such a rule as a planning reference rather than a guarantee is the reasonable reading, and individual circumstances differ enough that professional advice is usually warranted.