Sequence of Returns Risk Calculator (Canada)
This sequence of returns risk calculator runs your withdrawals through three orderings of the same average return and shows what a bad first decade costs.
What it does
The Sequence of Returns Risk Calculator takes a Canadian retirement portfolio, splits it into equities, bonds and cash, and then walks the money forward year by year under three return sequences that share exactly the same average. The only thing that changes is when the bad years land. What comes back is how long the portfolio lasts in each case, and how much first-year income a bad start would force you to give up.
Data sources & parameters
The figures below drive this calculator. We keep them aligned with the latest official guidance, and each result recalculates automatically whenever a value changes.
| Parameter | Value | Source | Last updated |
|---|---|---|---|
| RRIF minimum withdrawal factor by age | Rate schedule | laws-lois.justice.gc.ca | Effective 2025-01-01Every factor re-checked line by line against Income Tax Regulations s. 7308(4); the citation now points at the regulation rather than a third-party summary. |
| RRIF prescribed factors, general rule: the table starts at 71, its top row applies at 95 or older, and below the table the factor is 1/(90 – age) | Rate schedule | laws-lois.justice.gc.ca | Effective 2026-01-01Below 71 the prescribed factor is 1/(90 – age); the published table runs from 71 and its top row applies from 95 (Income Tax Regulations s. 7308(4)). |
We always strive to use the latest data for every variable so our results and reports are as accurate as possible. Even so, errors are possible — you should not rely on this tool or its report alone, and we accept no liability for any decision made based on it.
The formula
mu = w_eq·r_eq + w_bd·r_bd + w_cash·r_cash; adverse year t = mu − w_eq·shock for t ≤ k, then mu + w_eq·shock·k ÷ (H − k); balance(t+1) = (balance(t) − withdrawal(t)) × (1 + return(t))
How it works
Your asset weights are blended into one portfolio return. The equity sleeve is assumed to carry the early drawdown, so the portfolio-level shortfall in a bad year is the equity weight times the shock you enter. Three sequences are built from that: bad years first, level returns, good years first. Because the arithmetic mean is held identical across all three, every difference in the results is sequence risk and nothing else. Two withdrawal rules are run through each: a fixed amount indexed to inflation, and a constant percentage of the current balance.
Where it is used
- Seeing how many years a bad first decade costs a retirement plan
- Finding the withdrawal a portfolio supports when the crash comes first
- Comparing a fixed indexed withdrawal with a percentage-of-balance rule
- Testing how much sequence risk your equity weight is actually buying
Worked example
A CA$900,000.00 portfolio held 55 per cent in equities and 35 per cent in bonds blends to a … return, and a CA$45,000.00 first-year withdrawal is … of it. On level returns the money lasts the full … years and still leaves …. Move the same returns around so the weak 5 years come first and the portfolio empties after … years, … years short, having paid out … on the way. A start that runs the other way leaves …. To survive the bad ordering the first-year withdrawal would have had to start at … rather than …, a … annual pay cut, or … of the portfolio. Switching to a percentage-of-balance rule removes the risk of running dry but pulls final-year income down to … in today's dollars, a cut of …. With 60 per cent of the money inside a RRIF at age 65, the prescribed minimum in year one is …, comfortably under the planned withdrawal, and the crossover age at which the minimum would start forcing out more than the plan spends comes back as … because it never happens inside this horizon.
What the sequence of returns risk calculator does
Two retirees with identical portfolios, spending and average returns can end up in very different places. The calculator blends your equity, bond and cash sleeves into one expected return and runs the balance forward year by year under three return sequences with exactly the same arithmetic mean. The only difference is when the weak years arrive.
A worked example
A $900,000 portfolio split 55% equities, 35% bonds and 10% cash, with expected returns of 7%, 3.5% and 2.5%, blends to about 5.33%. It funds a $45,000 first-year withdrawal, 5% of the balance, indexed at 2% inflation, for 30 years. With level returns it lasts the full 30 years with about $90,419 left; with the weak years last it ends with about $510,393. Put five years of equity returns eight points below trend at the start, and the money runs out after about 25.3 years. The average and the spending did not change, only the order.
To survive the bad start, the first-year withdrawal would need to be about $40,837, a 4.54% rate, against about $45,974 with level returns, about $5,137 a year less. Under the variable rule the money never runs out, but final-year income after the bad start is about $25,425 in today’s dollars, a 43.5% cut. With 60% of the portfolio in a RRIF, the year-one minimum is $21,600.
How this differs from the safe withdrawal rate calculator
The Canadian safe withdrawal rate calculator is a sizing tool: give it a spending target, a rate such as 4% and your expected CPP and OAS, and it tells you the portfolio you need. It has no time axis, market path or asset mix.
This calculator is a stress test. It ignores CPP and OAS and asks what your asset mix does to the risk, and what happens to a plan sized on an average when the returns arrive in an unhelpful order. It also fills a gap in the Monte Carlo simulator on the site, which works from the realized annualized return over the whole horizon and so cannot see ordering.
Portfolio composition drives the size of the risk
The equity sleeve carries the early drawdown, and the shock is scaled by the equity weight: a fifteen-point equity shortfall is a 13.5-point hit to a 90% equity portfolio and 4.5 points to a 30% one. Raising equity lifts the blended return and the withdrawal level returns can support, but it also widens the gap to the adverse path, lowering the withdrawal a bad ordering can support. The calculator shows both so you can see whether the extra return is worth it. With no equity at all, the sequence risk cost is zero, because all three paths are the same, though the blended return and sustainable withdrawal are usually much lower.
Fixed withdrawals against variable withdrawals
The fixed rule takes your first-year amount and indexes it to inflation, as the 4% rule describes. It can run out, and the years-remaining figures are computed under it.
The variable rule applies the same starting percentage to the current balance each year, so income rises and falls with the portfolio and the account never empties. Its cost is income volatility, shown as the final-year withdrawal in today’s dollars against your starting amount.
Neither rule is right in the abstract. Many workable plans combine a floor of guaranteed income from CPP, OAS and any defined benefit pension for essentials with a flexible portfolio withdrawal for everything above it.
The RRIF minimum
The CRA factor table, held in the parameter store, starts at 4% at age 65, reaches 5.28% at 71 when conversion is mandatory, and rises to 20% from 95. The calculator reports the year-one minimum on the RRIF share and the age at which the minimum first exceeds your planned spending, but does not treat forced withdrawals as spending, since the excess can be moved to a TFSA or non-registered account. The crossover age marks when the RRIF schedule rather than your lifestyle starts driving your tax, which is when drawdown order and income splitting start to matter.
Reading the results
If all three years-lasting figures equal your horizon, the plan survives every ordering tested. If the adverse figure falls short while the level one does not, the plan is safe on average but fragile to order, the most common and most dangerous result, because it looks fine in a conventional projection.
The gap between the two sustainable withdrawals is the annual income you would give up now to make the plan robust to a bad start. If you could cut spending by that much in a bad year, you may not need to give it up in advance; with no discretionary spending left, you probably do.
Every figure is an estimate built on assumptions you supply, not a forecast or personal financial advice; real markets will not follow any of the three tidy sequences. Speak to a licensed adviser before changing a retirement plan.
About This Tool: Sequence of Returns Risk
Sequence of returns risk: use this tool to get an instant, accurate estimate. The figures follow official CRA guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.
Tax year 2026
Frequently asked questions
What is sequence of returns risk in plain language?
How is this different from the safe withdrawal rate calculator?
Does it use random simulations?
What should I enter for the equity shock and its length?
Why does the variable withdrawal rule never run out of money?
How does the RRIF minimum fit into this?
About the author
