One Mistake More Than Triples the Risk of Outliving Retirement Savings, 154-Year Analysis Finds

One common investing mistake more than triples the risk of running out of money in retirement, according to a new analysis of 154 years of market data. The mistake is selling stocks after a crash and buying back later.

The analysis, published at firenum.com, replayed every 30-year retirement since 1871 using the Shiller S&P 500 dataset. A retiree who stayed invested through downturns saw a 98.4% success rate. A retiree who carried the documented "behavior gap" of 1.5% a year, the cost of selling low and buying back high, succeeded only 79.2% of the time. The failure rate rose from 1.6% to 20.8%.

For early retirees the stakes climb. Over a 40-year retirement, the typical length for someone who leaves work in their mid-40s, staying invested succeeded 86% of the time. Panicking dropped that to 46%, worse than a coin flip. When the mistake changed the outcome, it drained the portfolio a median of 2.2 years sooner over 30 years and 7.7 years sooner over 40.

The 1.5% behavior gap is not new. Vanguard's research on "advisor's alpha" attributes roughly half of an advisor's measured value to behavioral coaching, the work of keeping clients invested during a crash. Dalbar's annual study of real investor returns reports a similar gap year after year. The firenum analysis is the first to translate that figure into years of lost retirement for FIRE-length horizons.

The study also names the catch most coverage omits. A 1% assets-under-management fee on a $1M portfolio costs $10,000 a year and rises as the portfolio grows, consuming most of the 1.5% an advisor adds. A flat-fee or hourly advisor charges the same at any portfolio size, so the value stays with the client.

We make planning software, so people expect us to say you don't need an advisor. The numbers say otherwise. Staying invested through a crash is worth more than any feature we could build, and the fairest way to pay for that help is a flat fee.

the team behind firenum.com

This release was distributed on the wire and syndicated by financial outlets including Barchart.

The takeaway for do-it-yourself planners is a written plan they trust enough to hold during a downturn. A plan stress-tested against a 40% crash in advance is easier to keep when markets fall. For those who want a human in their corner, the analysis points to fee-only advisors who charge flat or hourly rates. The full study and methodology are at firenum.com/blog/is-a-financial-advisor-worth-it.

About firenum.com

firenum.com is a free retirement planning tool with Monte Carlo simulation, historical backtesting and stress testing. All calculations run in the browser with no data collection or account requirements.

Media contact

Writing about this research? Reach us at contact@firenum.com for data, methodology details, or quotes. Sources: Vanguard Advisor's Alpha (Kinniry et al.), Dalbar QAIB, Shiller S&P 500 dataset (1871-present), Bengen (1994).