Seeking A Fixed Percentage Approach To Retirement Spending
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.
The Problems With A Constant Retirement Spending Strategy
The first method to be tested is the original constant inflation-adjusted withdrawal strategy introduced in William Bengen’s 1994 article, “Determining Withdrawal Rates Using Historical Data.” This will serve as a baseline for subsequent comparison with other strategies. Bengen’s rule says to adjust spending annually for inflation and maintain constant inflation-adjusted spending until the portfolio depletes.
The Most Important Investment Decision You’ll Ever Make About Your Portfolio
When most people think about investing, they’re thinking about stuff that doesn’t really matter. They’re caught up in the minutiae: What fund should I own? How fast did the iPhone 7 sell out (and are people really going to be okay with no headphone jack)? What sector is going to take off this fall? But that’s not really what determines your portfolio’s fate. What really matters is your ratio between stocks and bonds.
The Perks Of Being A Flexible Spender In Retirement
William Bengen’s 1994 article introduced the concept of the 4% rule for retirement withdrawals. He defined the sustainable spending rate as the percentage of retirement date assets which can be withdrawn, with this amount adjusted for inflation in subsequent years, such that the retirement portfolio is not depleted for at least thirty years.
How Much You Should Spend In Retirement Depends On How Long You Think You’ll Live
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.
Sustainable Retirement Spending and Market Returns
What happens to sustainable spending rates as the planning horizon extends, or
if we build in a constraint to preserve wealth and avoid portfolio depletion?
Does Your Retirement Plan Account For Your Own Cognitive Decline?
When it comes to financial planning, Vanguard’s “Alpha” and Morningstar’s “Gamma” are really just the tip of the iceberg.
What Is a Safety-First Retirement Plan?
The safety-first school of thought was originally derived from academic models of how people allocate their resources over a lifetime to maximize lifetime satisfaction.
The 4% Rule And The Search For A Safe Withdrawal Rate
Of the two main schools of thought in retirement income planning, the probability-based school of thought is probably most familiar to the public and financial professionals.
Two Philosophies of Retirement Income Planning
Within the world of retirement income planning, the siloed nature of financial services between investments and insurance leads to two opposing philosophies about how to build a retirement plan.
