One of the worst things that can happen in the early years of retirement is to get hit hard in a market sell-off. And what’s critical isn’t the amount your account loses; it’s the timing of the loss.

If you suffer a big loss at any time during your golden years, you will have less cash/principal available to you. But what is less obvious is the fact that if it happens early on, you’ll have less money growing over a longer period.

And as you’ll see, it is the growth that is the issue.

If you run the compounding numbers and assume a drop in your portfolio of 10% or 15% in the first few years of retirement, you’ll see it has a negative effect on your account value for the rest of your life. There won’t be as much money growing, and down the road, you’ll have less principal than you might have assumed.

And the earlier in retirement it happens, the greater the long-term negative effect will be.

The most recent worst-case scenario would have been if you had retired in 2006 or 2007. Your account value would have dropped as much as 60%… and it took around five years for the market to recover.

That’s five years of virtually no growth while your account came back. And if you cut and ran, and established losses – as many did – your future account value took a giant, permanent hit.

Anyone who has already crossed over from the working world can tell you that the money side of the equation is scary. There are no more paychecks coming in. Except for whatever growth you can generate, what you have is all you’ll ever have.

With this scenario in mind, I have to question the wisdom of boomers’ spending habits early in retirement.

Experts tell us that in the first few years of retirement, our rate of spending actually increases above what it was during our last few working years.

It’s been described as a celebration or release reaction to being out from under the daily grind. Now we have the time and money to travel and do the things we put off for so long.