What is sequence-of-returns risk and why does it hit early retirees hardest?

Sequence-of-returns risk is the danger that a market crash early in retirement permanently damages your portfolio, because you're selling shares at low prices to fund living expenses — locking in losses that never fully recover. The same average return delivered in a different order can mean success or failure. Early retirees are especially exposed because they have decades of withdrawals ahead and no Social Security or pension yet cushioning the draw. The most dangerous window is roughly the first five to ten years. You can blunt it several ways: keep one to three years of spending in cash or short bonds so you don't sell stocks in a downturn, stay flexible by cutting discretionary spending in bad years, start with a lower withdrawal rate, or earn some income early on. Plan the income side, not just the number.