What is sequence-of-returns risk and how do I protect against it?

Sequence-of-returns risk is the danger that a market crash early in retirement does far more damage than the same crash later, because you're selling investments to live on while prices are down – locking in losses the portfolio can never fully recover from. Two retirees with identical average returns can end up worlds apart depending purely on the order of those returns. Defenses include holding 1–3 years of spending in cash so you don't sell stocks in a downturn, using flexible 'guardrail' withdrawals that trim spending after bad years, keeping a bond ladder or bucket for the early years, and covering essential expenses with guaranteed income like Social Security or an annuity. The first five years of retirement are the most fragile, so build the buffer before you stop working, not after a crash hits.