Sequence of Returns Risk: Sanctuary Metals President Luke Losinsky Explains Where Physical Gold May Fit in Retirement Diversification

Retirement investors spend decades thinking about how much their portfolios might earn. Far less attention is often given to when those returns arrive.

That difference can become critical once withdrawals begin.

An investor who experiences a major market decline during the first few years of retirement may face a very different outcome from someone who experiences the same decline 15 or 20 years later. Even if both investors ultimately achieve similar average investment returns, withdrawing money while assets are depressed can permanently reduce the amount of capital remaining to participate in a later recovery.

Financial planners call this sequence of returns risk, and it can become one of the most important threats facing an investor near or entering retirement.

For Luke Losinsky, President of Sanctuary Metals, the concept raises a broader question about retirement diversification.

“Most investors understand market risk, but sequence risk is different because timing suddenly matters,” Losinsky said. “Once someone begins taking withdrawals, a temporary market decline can have a permanent effect if assets have to be sold while they are down. That makes diversification especially important during the transition from saving to spending.”

Gold cannot eliminate sequence-of-returns risk, and precious metals are not guaranteed to rise when stocks fall. But Losinsky believes physical gold deserves consideration as one potential source of asset-type diversification for investors whose retirement savings are otherwise heavily dependent on stocks, bonds, and cash.

What Is Sequence of Returns Risk?

Sequence of returns risk is the possibility that the order in which investment gains and losses occur can materially affect the longevity of a retirement portfolio.

During the accumulation years, the order of returns generally matters less because an investor is contributing money rather than withdrawing it. A sharp market decline can still be painful, but someone who remains employed may have years or decades to recover and can continue purchasing assets while prices are lower.

Retirement changes that equation.

Once withdrawals begin, the investor may need to sell assets regardless of market conditions. If stocks experience a major decline at the same time a retiree needs money for housing, healthcare, taxes, or ordinary living expenses, those withdrawals can force the sale of more shares at depressed prices.

The portfolio then has fewer assets remaining when markets eventually recover.

That is why two retirees with the same starting balance and the same long-term average return can finish with very different outcomes if their gains and losses occur in a different order.

Losinsky believes this concept deserves more attention because it changes the purpose of diversification.

“During accumulation, investors naturally focus on growth,” he said. “Once retirement begins, the question becomes broader. You still need growth, but you also need liquidity, stability, and enough diversification that you are not forced to sell the same assets every time the market becomes difficult.”

Why Are the First Years of Retirement So Important?

The years immediately before and after retirement can be particularly important because the investor is transitioning from contributing money to withdrawing it.

A severe market decline during this period can have consequences that extend far beyond the initial loss.

If markets perform well during the first several years of retirement, investment gains may help offset withdrawals. If a retiree encounters a deep bear market immediately after leaving the workforce, however, withdrawals can compound the decline.

The problem is not simply that the investments lost value. The retiree may also need to sell a larger number of shares to generate the same amount of income.

Once those assets have been sold and the proceeds spent, a later market recovery cannot restore those particular holdings.

This is what makes sequence risk fundamentally different from ordinary volatility.

A younger investor may view a major decline as temporary. A retiree making regular withdrawals may experience the same decline as a long-term threat to portfolio sustainability.

“The closer someone gets to needing the money, the more important the structure of the portfolio becomes,” Losinsky said. “A younger investor can potentially wait through a long recovery. Someone already taking distributions may not have the same flexibility.”

Why Don’t Average Returns Tell the Whole Retirement Story?

Average returns can be useful for long-term planning, but they can hide the effect of timing.

Consider two hypothetical retirees whose portfolios produce the same average return over 20 years. One experiences strong gains early and weaker markets later. The other encounters substantial losses during the first several years before eventually recovering.

If neither investor were withdrawing money, their long-term results might be relatively similar.

But retirees are not simply watching an account balance. They are using the portfolio to fund their lives.

The portfolio experiencing early losses has to support spending even as its asset base shrinks. That combination can significantly change the long-term result.

A later recovery may raise the value of the remaining assets, but it cannot recover money that was withdrawn and spent during the downturn.

That is why retirement planning cannot be reduced to selecting investments with the highest expected long-term return. Liquidity, withdrawal strategy, diversification, and the relationships among different assets become increasingly important once the portfolio begins to support retirement income.

What Happens When Stocks and Bonds Fall at the Same Time?

For decades, many retirement portfolios have relied on a straightforward assumption: stocks may provide long-term growth while high-quality bonds can provide stability when equity markets weaken.

That relationship can still work, but it is not guaranteed.

Inflation, interest-rate changes, and certain economic shocks can cause stocks and bonds to decline together. When that happens, a portfolio built primarily around those two asset classes may provide less protection than an investor expected.

This can be especially challenging for retirees because withdrawals do not necessarily stop when markets become difficult.

Losinsky does not believe this means bonds are ineffective or obsolete. Instead, he argues that investors should avoid assuming that historical relationships between asset classes will always hold.

“Stocks and bonds remain foundational assets for many investors,” Losinsky said. “But no market relationship is permanent. If an entire retirement strategy depends on one asset always offsetting another, it is worth asking what happens when that relationship temporarily breaks down.”

That question can lead to a broader discussion of diversification beyond the traditional stock-and-bond mix.

Can Physical Gold Help With Sequence-of-Returns Risk?

Gold does not solve sequence-of-returns risk, and it should not be presented as though it does.

The more measured argument is that physical gold can introduce exposure to economic drivers that differ from those affecting stocks and bonds.

Gold does not depend on corporate earnings. It does not pay a bond coupon, and it is not an ownership interest in a business or a debt obligation issued by a corporation or government.

Its price responds to a different combination of forces, including interest rates, currency movements, central-bank activity, inflation expectations, geopolitical conditions, investment demand, and broader market sentiment.

Those differences can make gold a useful diversifier.

The important point is not that gold will rise every time equities decline. It will not.

The potential value lies in the possibility that gold may respond differently enough from traditional financial assets to reduce the portfolio’s dependence on one particular market outcome.

“The argument for gold should not be that it goes up every time stocks fall,” Losinsky said. “That is not true. The argument is that gold has different return drivers, and an appropriate allocation may give a portfolio another source of diversification when traditional assets are under pressure.”

For an investor nearing retirement, reducing dependence on one market outcome may be particularly relevant.

Why Might Physical Gold Be Different From Adding Another Financial Security?

A retirement portfolio can contain many investments and still remain concentrated in financial securities.

An investor may own several equity funds, multiple bond funds, international stocks, Treasury securities, exchange-traded funds, and cash. That can provide meaningful diversification, but nearly every position still exists within the traditional securities system.

Physical gold introduces another type of asset.

It is tangible property rather than corporate equity or debt.

That distinction does not automatically make physical gold safer. Gold can decline substantially in value, and physical precious metals held inside a retirement account involve custody and storage considerations.

But investors who specifically want asset-type diversification may value owning something structurally different from the majority of their retirement portfolio.

For eligible investors, a self-directed precious metals IRA can provide a structure for holding certain qualifying physical precious metals within a retirement account.

Losinsky describes this as diversification by structure rather than simply by ticker symbol.

“Owning more securities can absolutely improve diversification,” he said. “But there is also a difference between diversifying among securities and adding an asset that is fundamentally different from a security.”

How Can a Gold IRA Fit Into Retirement Diversification?

A Gold IRA is generally a self-directed individual retirement account capable of holding certain qualifying physical precious metals.

It is not a special type of gold and should not be confused with purchasing bullion personally and storing it at home.

The retirement account is generally administered by an eligible custodian, while qualifying physical metals are held through an appropriate storage arrangement under the IRA structure.

For some investors, this provides a way to add physical precious-metal exposure while maintaining the assets inside a retirement account.

A Gold IRA rollover may allow eligible retirement funds from another IRA or certain employer-sponsored plans to be transferred into a self-directed account that can hold qualifying physical gold, depending on the investor’s circumstances and applicable plan rules.

That does not mean an investor should move an entire retirement account into precious metals.

Losinsky believes concentration in gold could simply create the same problem diversification was intended to solve.

“If the purpose is diversification, putting everything into gold defeats the purpose,” he said. “The conversation should be about whether physical metals complement stocks, bonds, cash, and other assets—not whether they replace them.”

Why Could Gold Become More Relevant as Retirement Approaches?

The value of diversification can change as an investor moves from accumulation to distribution.

A younger investor with a long time horizon may reasonably prioritize growth. If stocks decline sharply, the investor may continue contributing and potentially benefit from lower prices.

A retiree is in a different position.

The portfolio may need to produce cash regardless of whether markets are rising or falling.

This is why retirement planning often involves more than maximizing expected returns. Investors may need to balance growth with liquidity, income, capital preservation, and the ability to withstand unfavorable market conditions.

Physical gold may play a role for some investors because its performance is not driven by exactly the same factors as corporate equities or fixed-income securities.

That does not mean the investor should expect to sell gold every time stocks decline.

The broader objective may simply be to reduce the likelihood that every major portion of the portfolio is under pressure for the same reason at the same time.

This is a more modest claim than calling gold a guaranteed hedge, but Losinsky believes it is also a more responsible one.

What Should Investors Understand Before Using a Gold IRA?

The first question should be whether physical precious metals serve a clear purpose within the overall retirement strategy.

An investor approaching retirement may need the portfolio to accomplish several things simultaneously. It may need to generate growth for a retirement that could last for decades, provide liquidity for current expenses, and maintain sufficient stability so the investor is not repeatedly forced to sell assets during weak markets.

Income matters. Volatility matters. Taxes matter. Healthcare costs matter. Future retirement distributions may matter.

Physical precious metals should therefore be evaluated as part of that complete structure.

Investors should also understand how the account works before moving retirement funds. That includes the role of the custodian, the custody and storage of physical metals, eligibility requirements, and how the account fits into the larger retirement plan.

Sanctuary Metals provides an educational overview of how to set up a precious metals IRA or 401(k) for investors researching the process.

There is no universally correct allocation to precious metals.

The appropriate amount, if any, depends on the investor’s assets, age, income needs, risk tolerance, time horizon, and overall retirement strategy.

What Are Luke Losinsky’s Three Questions for Investors Approaching Retirement?

Losinsky believes investors nearing retirement should be able to answer three questions before beginning regular portfolio withdrawals.

The first is what the investor would sell if markets fell sharply. A retiree who needs cash during a downturn should understand where that liquidity would come from. Depending entirely on selling depressed equities can magnify sequence risk.

The second question is how dependent the portfolio is on stocks and bonds, with the two offsetting one another. Those asset classes often behave differently, but inflationary and monetary shocks can cause both to decline simultaneously. Retirement planning should acknowledge that possibility rather than assume historical correlations are permanent.

The third question is whether the portfolio contains assets with fundamentally different return drivers. For some investors, the answer may include cash, real assets, commodities, or physical precious metals.

Losinsky does not argue that gold is the only answer. He believes the broader question is what matters.

“A retirement portfolio should be built so that one bad market environment does not automatically force the investor into the worst possible decision,” he said. “The goal is not to predict the next crisis. It is to build enough flexibility that you can respond when something unexpected happens.”

Is Gold a Guaranteed Hedge Against a Stock-Market Decline?

No.

Gold can fall at the same time stocks fall. It can also underperform for extended periods, and it does not generate interest or dividends.

That is why describing gold as guaranteed portfolio insurance would be misleading.

Its potential value lies in the possibility that its return drivers differ sufficiently from those of traditional financial assets to contribute to diversification over time.

Historical market relationships can help investors understand how assets behaved in the past, but they cannot guarantee how those assets will behave in the future.

That limitation is especially important in retirement planning, where investors should be skeptical of any product or strategy that claims to eliminate risk.

There is no risk-free retirement portfolio.

The objective is to manage different types of risk rather than pretend they can all be removed.

Can Too Much Gold Increase Retirement Risk?

Yes.

A concentrated allocation to physical precious metals can create significant risks of its own.

Gold does not produce cash flow. Investors relying on retirement assets for regular income may therefore need substantial exposure to other assets capable of producing interest, dividends, or other sources of return.

Gold can also experience prolonged periods of weak or negative performance.

An investor who moves most retirement savings into precious metals could become heavily dependent on future metal prices, replacing one concentration with another.

Losinsky believes this point is essential.

“Physical gold can be a diversifier, but it should not become the entire plan,” he said. “The investor still needs growth, liquidity, income, and enough flexibility to support retirement expenses. The goal is balance.”

Can Gold Help With Sequence-of-Returns Risk?

Gold cannot eliminate sequence-of-returns risk.

However, a measured allocation to physical gold may provide some retirement portfolios with additional diversification by asset class, as gold is driven by different economic forces than stocks and bonds.

For an investor entering retirement, the potential benefit is not that gold is guaranteed to rise during every stock-market decline.

The potential benefit is that a portfolio containing assets with different return drivers may be less dependent on stocks and bonds performing well at exactly the moment withdrawals begin.

Sequence-of-returns risk ultimately arises from a difficult combination: market losses, withdrawals, and unfortunate timing.

Diversification cannot control the timing.

It may, however, help investors build a portfolio that is less vulnerable to a single market outcome.

Final Thoughts: Why Sequence-of-Returns Risk Changes the Retirement Conversation

Retirement planning is often built around averages: expected returns, inflation, withdrawals, and life expectancy. Actual retirement, however, rarely unfolds according to an average.

Markets can decline at exactly the wrong time. Inflation can remain elevated longer than anticipated. Stocks and bonds can occasionally fall together. A retirement that was expected to last 20 years may need to support income for 30 years or more. Once regular withdrawals begin, those uncertainties become more consequential because the investor no longer has unlimited time to wait for markets to recover.

That is what makes sequence-of-returns risk so important. A market decline during the early years of retirement can affect more than an account balance. If an investor must sell assets while prices are depressed, fewer assets remain to participate in a later recovery. A temporary market decline can therefore create a lasting effect on the portfolio.

For Luke Losinsky and Sanctuary Metals, this changes the way retirement diversification should be discussed. The objective is not simply to identify the asset with the highest expected return. It is to build a portfolio capable of navigating different economic environments while still providing the liquidity, growth, and flexibility a retiree may need.

Physical gold can be part of that conversation for some investors because its value is influenced by different forces than corporate earnings or bond yields. That does not make gold a guaranteed hedge, nor does it mean precious metals should replace stocks, bonds, cash, or other productive assets. Gold can decline in value, sometimes significantly, and an excessive allocation can create a new concentration risk.

The more measured question is whether a retirement portfolio heavily dependent on traditional financial assets could benefit from a limited allocation to something with fundamentally different characteristics.

Losinsky believes that question becomes increasingly relevant as an investor moves from accumulating wealth to drawing income from it.

“When someone is 20 years from retirement, a market decline can be an opportunity to continue investing,” Losinsky said. “When someone has already retired and is taking withdrawals, the same decline can create a completely different problem. That is why the structure of the portfolio matters as much as the return forecast.”

Ultimately, sequence-of-returns risk is a reminder that successful retirement planning is not only about how much a portfolio earns over time. It is also about whether the portfolio can withstand difficult markets at inconvenient moments without forcing the investor into decisions that permanently weaken the retirement plan.

For some investors, qualifying physical precious metals may provide one additional source of diversification within that broader structure. The purpose is not to predict the next recession, market decline, inflation shock, or financial crisis. It is to reduce dependence on any single economic outcome.

The most important retirement question may therefore be less about what the market is expected to return and more about what happens if the difficult years arrive first.

Disclaimer: This article is provided for informational purposes only and does not constitute investment, retirement, tax, or legal advice or a recommendation to buy or sell any asset. Gold and other precious metals can decline substantially in value, do not generate interest or dividends, and may not be appropriate for every investor. Historical diversification results do not guarantee future performance. Self-directed retirement accounts involve additional rules, custody, costs, and storage considerations. Investors should evaluate their individual circumstances and consult qualified financial, tax, retirement, and legal professionals before making investment decisions.