Sequence-of-Returns Buffer for Public Markets
Use policy value as a bear-market bridge. Repay on recovery. Fewer forced sales.
Product identification: this page discusses participating whole life insurance. It is insurance, not a bank account or investment.
We are not a bank: “The Infinite Banker” is an education brand. We do not accept deposits, and we do not offer FDIC- or NCUA-insured products.
Guaranteed vs non-guaranteed: dividends and other non-guaranteed elements are not guaranteed and may change. Any values shown that include non-guaranteed elements are for education only.
The Sequence-of-Returns Problem
Sequence-of-returns risk is the silent killer of retirement portfolios. Here’s the issue:
You retire with $2,000,000 in a stock portfolio. You plan to draw $80,000/year (4% withdrawal rate). The market averages 8% over 30 years, so the math says you’re fine.
But averages lie.
If the market drops 30% in year one and two of your retirement, you’re withdrawing from a declining portfolio. You’re selling shares at depressed prices to fund living expenses. Even when the market recovers, you’ve permanently reduced your capital base. The portfolio never catches up.
Scenario A: Bull market early in retirement
Year 1: +15%, withdraw $80k
Year 2: +10%, withdraw $80k
Year 3: -20%, withdraw $80k
Result: Portfolio stays healthy, recovers easily
Scenario B: Bear market early in retirement
Year 1: -20%, withdraw $80k
Year 2: -10%, withdraw $80k
Year 3: +15%, withdraw $80k
Result: Portfolio depleted, forced selling locks in losses
Same average returns. Completely different outcomes. That’s sequence risk.
The Traditional Solutions (All Flawed)
Cash reserve: Hold 2 to 3 years expenses in cash. Sounds safe, but cash earns nothing. You’re sacrificing growth on $160k to $240k permanently.
Annuity: Guaranteed income, but you give up control and liquidity. Plus, once you annuitize, that capital is gone.
Lower withdrawal rate: Drop to 3% to be “safe.” But that’s $20,000 less per year. For 30 years. That’s $600,000 in foregone lifestyle.
None of these are optimal.
Policy Loans as a Sequence Buffer
Here’s a better approach: maintain your equity allocation, but use policy loans to bridge bear markets.
Your structure:
$2,000,000 stock portfolio
$500,000 whole life cash value
Bear market hits in year one of retirement:
Portfolio drops 25% to $1,500,000
Instead of selling equities at depressed prices, take $80,000 policy loan
Let the portfolio sit untouched
Year two: market still down 10%
Portfolio now worth $1,350,000 (would have been worse with forced sales)
Take another $80,000 policy loan
Still no forced selling
Year three: market recovers +20%
Portfolio back to $1,620,000
Resume withdrawals from portfolio
Optionally begin repaying policy loans from portfolio distributions
The result:
You avoided selling $160,000 of equities at fire-sale prices. When the market recovered, your portfolio recovered with it. The policy loan can be repaid over time, or you can let it ride and reduce the death benefit. Either way, you preserved your capital base.
The Math on Forced Selling vs Policy Buffer
Let’s compare two retirees, both starting with $2M portfolios and $80k/year needs.
Retiree A: No buffer, forced selling in bear market
Year 1: Market -25%, forced to sell $80k at depressed prices, portfolio = $1.42M
Year 2: Market -10%, forced to sell $80k, portfolio = $1.2M
Year 3: Market +20%, withdraw $80k, portfolio = $1.36M
Permanent damage: Portfolio down to $1.36M despite market recovering
Retiree B: Policy buffer, no forced selling
Year 1: Market -25%, take $80k policy loan, portfolio = $1.5M (untouched)
Year 2: Market -10%, take $80k policy loan, portfolio = $1.35M (untouched)
Year 3: Market +20%, withdraw $80k from portfolio, portfolio = $1.54M
Outcome: Portfolio at $1.54M, $180k in policy loans outstanding
Retiree B has $180,000 more in portfolio value. Even after accounting for the policy loan, net worth is higher. And as the portfolio continues growing, loan repayment becomes trivial or unnecessary.
Flexibility to Repay or Not
Here’s the beauty: you control the repayment decision.
Option 1: Repay aggressively
Market recovers strongly in years 4 and 5. You take extra distributions and repay the policy loans. Cash value restored. Death benefit intact. Ready for the next bear market.
Option 2: Repay slowly
Spread repayments over 10 years. Minimal impact on lifestyle or portfolio.
Option 3: Never repay
Let the loan stay outstanding for life. It reduces death benefit but preserves maximum portfolio growth. Heirs still receive a tax-free death benefit (net of loan).
The policy doesn’t force your hand. You choose based on market conditions and personal priorities.
This Isn’t Market Timing
Some people confuse this strategy with market timing. It’s not.
You’re not predicting when bear markets will occur. You’re simply creating a rule:
“If my portfolio drops more than 15% in a year, I use policy loans for living expenses until recovery.”
That’s it. No forecasting. No guessing. Just a mechanical response to drawdowns.
Who This Strategy Fits
This works best for retirees or near-retirees who:
Have significant equity exposure (60%+ stocks)
Need portfolio withdrawals to fund living expenses
Want to avoid forced selling in downturns
Have accumulated meaningful whole life cash value
Understand policy loans and are comfortable with the mechanics
It’s especially powerful for early retirees (age 50 to 60) who face longer retirement horizons and higher sequence risk.
Building the Buffer Before Retirement
Ideally, you build whole life cash value during your working years. By retirement, you have:
A fully capitalized policy with $300k to $500k+ cash value
15 to 20 years of dividend compounding behind it
Loan capacity equal to 90% of cash value
A tool ready to deploy the moment you need it
This isn’t a last-minute strategy. It’s a 10 to 20 year build.
Real Client Case
Client: Age 62, retired, $2.5M in 60/40 portfolio, $400k whole life cash value.
Retirement income need: $100,000/year.
2022 market downturn: Portfolio dropped 18% to $2.05M in first 9 months.
Client’s response:
Took $100k policy loan instead of selling portfolio
Let portfolio sit through the drawdown
Market recovered in 2023 and 2024
Portfolio back to $2.4M by end of 2024
Repaid $50k of the loan, left $50k outstanding
Outcome: By not selling at the bottom, client preserved roughly $150k in portfolio value compared to forced liquidation. The $50k policy loan remaining is a small price for that protection.
Steps to Implement
Build whole life cash value during accumulation years
Set your trigger rule (e.g., any year portfolio drops 15%+, use policy loans)
Enter retirement with both portfolio and policy in place
Monitor annually for drawdowns
Execute policy loans if trigger hits
Resume portfolio withdrawals once recovery occurs
Repay loans at your discretion
Why This Matters
Sequence-of-returns risk is real. It wrecks retirements quietly. Most retirees don’t realize the damage until it’s too late.
A properly structured whole life policy gives you a circuit breaker. When the market breaks, you have an alternative funding source. When it recovers, you’re still in the game with capital intact.
This system works best for high earners with existing liquidity and the capacity to fund meaningfully each month. If that’s you, complete intake and book your Discovery call.
Invitation to inquire: The information provided is an invitation to inquire about our services and is not an offer to sell insurance or securities. Renewal, cancellation, termination: Policies require ongoing premium payments. Non-payment may result in lapse or termination. Surrendering a policy may result in fees and tax consequences. Licensing scope: We are licensed insurance professionals. We do not provide legal, tax, or investment advice. Consult your advisors. Loans reduce cash value and death benefit: Outstanding loans and interest reduce available cash value and death benefit. Loans are not required to be repaid during the insured’s lifetime, but unpaid loans will reduce death benefit. Comparisons are educational: Any comparisons to other financial products are for educational purposes only and are not guarantees of performance. “Infinite Banking Concept®” is a registered trademark of Infinite Banking Concepts, LLC. The Infinite Banker is independent: We are not affiliated with or endorsed by Infinite Banking Concepts, LLC.
