What is a SAFE Withdrawal Rate in Retirement?

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?

Safe Money Financial opportunities

If you  could take a portion of your assets  and  guarantee better than 4.5-5.4% on you money for as much as 17 to 27 yrs would you be interested. What if you  could get a guaranteed monthly income over that period. Admittedly not  everyone is eligible or has enough liquidity to do this. If you are a younger successful professional or business owner this might be right for you. Another candidate would be an older individual who is interested in providing for children or grandchildren's benefit.. Someone who is tired of the ups and downs in the market could benefit.
All of these opportunities offer protection from market risk and offer a guaranteed future rate of return and a schedule of income.  It certainly would not be appropriate to allocate most of ones assets like this. However using this for a a portion of ones Safe Money Strategy could be a good  fit.

Here are some examples. Availability changes over time

 allocate $154,000  and collect 300 payments of $1,008+ for a guaranteed 5.4% guaranteed yield and a total of almost $303K in total return. Retirement income or estate planning

allocate $122 K today  get over $242K to pay for childs college or for retirement in 14 yrs  Without market risk and if ROTH funds used $120K in  tax free gains.

allocate $46,700 now get 6 payments of $11,173 over the next 16 years for a total of $67,039

Allocate 30 K or maybe more and  collect  a guaranteed 6% rate of return ewith 8 years of equal monthly payments.

Call if interested, or to find out if it might be right for your  situation.

More Info On Life Insurance Awareness Month (LIAM)

Did you know that almost one quarter of American savings are in the form of Insurance Company products?
They are split between Cash Value Life Insurance and Annuity products. 
What is it that they know that you  don't?
Want to come up to speed on what the new products can do for you?

The amount of Death benefits life insurance claims payments in 2011 exceeded $60 Billion. This amount would be even higher if you add the payments made to Living policy owners !

The cash payments from  annuity contracts equaled over $75 Billion in 2011. Much of those assets and payments are paid out from contracts that protect the policyholder from Market Risk! That's why much of the savings are managed by insurers in the first place.  How much better could you sleep at night if you know at least a significant portion of your assets  and income were protected from  Market Risk. That is why these products are called Safe Money Products
How much of your assets and income are protected from Market risk?
Should we talk about implementing a Safe Money Strategy for  some of your assets??