Will You Run Out of Money During Retirement?
- Inflation increases.
- Investment returns or balances are lower than needed.
- They need long-term care and don’t own long-term care insurance.
- They provide financial support to needy family members or friends.
- Annual rebalancing for constant investment ratios of 63% in large-company stocks and 37% in government bonds
- Withdrawals that increased each year by inflation, and
- Historic rates for inflation and returns on investments.
- For tax-deferred portfolios
- With initial withdrawal rates of 4.15% or less, all retirement portfolios lasted 30 years or more.
- With higher initial withdrawal rates, an increasing number of the retirement portfolios failed to last 30 years.
- For example, with an initial withdrawal rate of 6%, 24 of the 50 retirement portfolios failed to last 30 years.
- For taxable portfolios, the initial withdrawal rates had to be lower to achieve the same level of success.
- Introducing other asset classes (small-company stocks, intermediate term bonds, etc.) increases the Maximum Safe Withdrawal Rate. However, the initial withdrawal rate still needed to be less than 4.6%.
Of course, these studies are based on historical data and past performance is no guarantee of future performance. Future investment returns may be very different from historical returns, even though the studies looked at very long periods of history.
Also, there are many other variables. For instance, one might have a more diversified mix of investments than S&P 500 Index stocks and government or corporate bonds.
This is for educational purposes only. To learn more about the topics mentioned and if they are suitable for you, consult an appropriate professional. Tax laws can change at any time.
Any information provided in this presentation has been prepared from sources believed to be reliable, but is not guaranteed and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for information purposes only and does not constitute a recommendation.
- Past performance is no guarantee of future performance;
- Investments involve the risk of loss of principal and earnings;
- ETFs, mutual funds, including money market funds, etc. are not guaranteed in any way by the US Government, the FDIC, a bank or anyone else.
- “Average annual return” evens out variations in the actual year-to-year returns.
- ETFs, mutual funds and individual stocks and bonds fluctuate in value and there will always be times when they lose value.
- None of the information provided by Arthur Stein is necessarily relevant to anyone’s particular situation. Situations differ among individuals and you should not assume that these generalizations or information apply to you.
- Investments mentioned may not be suitable for all investors.