What happens if bitcoin crashes early in retirement?

Why the order of returns matters

Sequence-of-returns risk is the risk that poor returns arrive when you are withdrawing from investments. The same long-run price recovery can mean very different retirement outcomes depending on when you sell.

Imagine two otherwise identical retirees facing the same bitcoin crash. One must sell bitcoin throughout the downturn. The other can fund that period from income or other investments. The first sells more coins at lower prices; the second may retain more bitcoin for a recovery. That does not make the second plan safe: other investments can fall too, income can change, and bitcoin may not recover.

This is a conceptual comparison, not a calculated result or a recommended withdrawal strategy. Use the tool to compare the funding gap and withdrawal approach for your own assumptions.

What Compass actually replays

Each scenario starts at your retirement opening balances and scales a recorded bitcoin price path to the starting bitcoin price. It uses relative monthly observations from the 2017–2018 and 2021–2022 cycles, beginning at a historical peak and continuing through the recorded recovery. It does not buy bitcoin at the old historical dollar price.

Opening Stress Test directly uses your current finances and starts retirement now. To test a future retirement, choose a date in Retirement Timeline and select Stress test this retirement. That sends the projected retirement balances, retirement age and income dates into Stress Test. Changes there apply after that opening; return to Timeline and send again to update the starting balances.

After each recorded cycle ends, bitcoin follows your selected growth assumption: a static growth rate or the Power Law growth path for the retirement calendar year. Other investments use your assumed growth rate throughout; their historical crashes are not replayed.

The chart shows the early historical-replay period, limited by your selected horizon. The funding outcome covers the full retirement horizon, including the assumed-growth years after the historical data ends.

Spending, income and withdrawal timing

Compass subtracts active retirement income from spending before selling investments. A pension that starts later helps from its scheduled age onward; it does not pay for the earlier bridge years. Set a birth date in Preferences to use age-scheduled income, and mark the relevant sources as continuing in retirement.

Sales happen at the start of each month, then growth applies to what remains. Income changes and a final partial month are prorated. The withdrawal approach chooses which assets to sell: other investments first, bitcoin first, a proportional split or a fixed split. If the selected asset cannot supply its share, the model falls back to the other asset.

Amounts are in today’s purchasing power. Returns are adjusted for inflation after the retirement opening; future balances sent from Timeline are already in today’s dollars. Spending and active income retain purchasing power. That effectively assumes income keeps pace with inflation; a pension without a cost-of-living adjustment may not.

Income above spending is not reinvested. A scenario passes only if every required withdrawal is funded; a fully funded final withdrawal may leave zero investments. Passing does not require a legacy balance.

A useful comparison to make

1. Enter the investments available for retirement, spending and dated income in My Finances. Check the retirement starting point and horizon before reading the result.
2. Run the historical scenarios. Compare the required portfolio withdrawal with the funding outcome, not just whether the chart eventually rises.
3. Change one assumption at a time: lower post-cycle growth, higher spending, later income or a different withdrawal approach. For a different retirement date, use Timeline and send the new opening again.
4. Look for the first unfunded period and how much the outcome depends on favorable assumptions. Consider what you could actually change if the early years went badly.

The estimated withdrawal capacity is a separate, constant monthly portfolio-withdrawal estimate across the tested cycles—not a recommended spending allowance. Its search stops at twice your actual monthly expenses, so reaching that cap does not establish an absolute maximum. Continuing income reduces required withdrawals without increasing this capacity estimate.

What a passing result does not tell you

• Two selected historical cycles are not a probability of success, a worst possible future or a prediction. Future declines can be deeper, longer or fundamentally different.
• Monthly observations do not capture every daily price move. A bitcoin price recovery does not guarantee recovery of a portfolio after withdrawals and inflation.
• Other assets follow assumed growth, not simultaneous historical market crashes. This is not a full historical backtest of a diversified portfolio.
• The model does not calculate taxes, fees, account-access restrictions or benefit eligibility. Check the amount actually available to spend and when you can access each investment.

A funded result is conditional on the inputs and selected horizon. It is not evidence that you can safely retire or that a particular bitcoin allocation is suitable.

Access and privacy

This guide is public. The Dashboard, My Finances and backup tools are free; personalized Stress Test planning is part of Compass Pro, included with a paid FIRE BTC subscription. Unlock Pro separately in each browser. Reading this page does not change your saved finances or unlock paid features.

Calculations run in your browser and financial inputs stay on your device. Keep a separate backup. Pageview analytics still make network requests. Compass is an educational planning tool, not financial, investment or tax advice.