There has been too much emphasis on the portfolio and spending conservatively to keep failure rates low. This is not the whole story for retirement income. Certain circumstances, which we will explore, may allow retirees to accept a higher probability of “failure,” and spend more aggressively from their investment portfolio.

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Of all of the different goal types, longevity goals are probably the least intuitive. Your longevity goals are based around the possibility that you will live longer than you expect. That sounds great, but your income plan needs to be able to fund those years of retirement (unless you plan on hustling Pinochle when you’re…

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The fixed percentage withdrawal strategy is the polar opposite of constant inflation-adjusted spending. Subsequent strategies we consider will strive to strike a balance between these two. This fixed percentage strategy calls for retirees to spend a constant percentage of the remaining portfolio balance in each year of retirement.

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In regards to my last column, I find it helps to visualize the data, and Exhibit 1 shows the specific spending rates for a variety of asset allocations and retirement lengths. It also shows the withdrawal rates implied by the required minimum distribution (RMD) rates set by the IRS for tax-deferred retirement accounts.

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Longevity risk—the risk of running out of assets before running out of time—is fundamental to retirement. We know about the distribution of longevity for the overall population, but an individual cannot know in advance precisely where he or she will fall in the distribution.

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