This question comes up a lot. It is critically important for 2 primary reasons. First if you take out too much you will run out of assets before you run out of Life. Second if you don't know what you can spend each year how do you know what income you will have in retirement!
Many people and most Financial Advisors are familiar with "The 4% Rule." Everyone should be!
It states that you should be able to withdraw 4% of your assets each year in retirement and Usually have your assets last as long as you live. Note that I said usually! You do not want to be an outlier who falls into the category of retirees who fail to have their assets last! What can you do to prevent it? I encourage my clients to use a withdrawal rate of less than 4% when working with their self managed money. There are products that offer a guaranteed rate of withdrawal higher than 4% and we can discuss those later.
A recent article published in Financial Planning was titled " A Safer withdrawal rate using various returns distributions" The conclusions stated that a safer withdrawal rate for todays environment is only 2.52%. Their work indicated that the more common 4% number fails almost 18% of the time. That conclusion says that 1 in 5 will die destitute if they don't adjust there spending or use other strategies besides self managing their retirement assets. Protection from that risk requires the use of some SAFE Money Strategies for some significant portion of your assets.
Only 3 thing can guarantee you a lifetime of income. Social Security (if the government stops stealing from SS funds), an ADEQUATELY funded private pension, or a properly funded designed and guaranteed life insurance product. Notice Stocks bonds mutual funds are not on this list because of Market Risk. They cannot guarantee you a value tomorrow never mind a value 20-30 years from now. Never Forget 2001, 2008-2009! It can happen again! On average you get negative returns 2-3 year out of 10. Look at the graphs for Stock Market Historical performance. If you doubt there is risk answer these questions.
What is the true unemployment rate today? You need to adjust the official numbers for those who quit looking! A more meaningful number is the % of working age adults actually working!
Is the Federal and state government controlling their spending?
Is the Deficit increasing?
Is Obamacare inflationary?
Is the real cost of goods and services you need to live on increasing?
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3 comments:
I have been working with the http://www.mutualfundstore.com and it seems that they have some very good financial advice to give. Your advice has me wondering if I should have another Advisor on the side. Not that the MutualFundStore isn’t good, but having more than one advisor can’t be all that bad either. Should I do this?
Alex, Sorry there was a problem with my reply to your individual inquiry. It certainly does not hurt to get a second opinion. If you like my Safe Money strategies Id be happy to discuss how my strategies can protect your assets when we hit another market downturn. The market is over bought and many economists are expecting a correction. When the economic recovery is weak, when the federal budget is out of control, when the Deficit is exploding those are good times to consider reducing your exposure to risk products. I am not ssuggesting you unload all securities but I am suggesting that you consider the financial planners "Rule of 100" which states subtract your current age from 100 and the remainder when viewed as a percewntage gives you the maximum % of your assets that should be exposed to risk. Simply having a mixture of stocks and bonds does not protect you from Market risk. Once you determine a safe money percentage then a Safe Money Adivir like myself can look at your total assets, your personal risk tolerance, your fixed expenses, your age, and your financial obligations and help you decide how to allocate your Safe Money assets, Call me or email me and we can discuss
614-264-3864 or
financial-services@live.com
Some products and strategies may not be available in every state or at every age. I may not be able to help someone in all 50 states. Some other products may be available in all 50 states. If I cannot help you with a particular product or a particular state I may be able to refer you to another financial professional who can help you in your state
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