Wade Pfau, Ph.D., CFA

Retirement Income Planning Should Focus On Saving, Not Withdrawing

In my last article, I discussed “safe savings rates.” The following case study illustrates the safe savings rate concept using someone saving for retirement during the final thirty years of her career, and she earns a constant real income in each of these years. A fixed savings rate determines the fraction of this income she saves at the end of each of the thirty years.

Savings are deposited into an investment portfolio which is allocated to an annually-rebalanced 50/50 portfolio of the S&P 500 and shorter-term bills. Retirement begins at the start of the thirty-first year and is assumed to last for thirty years. Altogether, the accumulation and decumulation lifecycle is sixty years.

Withdrawals are made at the beginning of each year during retirement. The underlying 50/50 asset allocation remains the same during retirement, as does the annual rebalancing assumption. Withdrawal amounts are defined as a replacement rate from final pre-retirement salary.

Read the full article at Forbes.

Retirement Researcher is a SEC registered investment adviser. The content of this publication reflects the views of Retirement Researcher (RR) and sources deemed by RR to be reliable. There are many different interpretations of investment statistics and many different ideas about how to best use them. Past performance is not indicative of future performance. The information provided is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy or sell securities. There are no warranties, expressed or implied, as to accuracy, completeness, or results obtained from any information on this presentation. Indexes are not available for direct investment. All investments involve risk.

The information throughout this presentation, whether stock quotes, charts, articles, or any other statements regarding market or other financial information, is obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission there of to the user. RR only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. It does not provide tax, legal, or accounting advice. The information contained in this presentation does not take into account your particular investment objectives, financial situation, or needs, and you should, in considering this material, discuss your individual circumstances with professionals in those areas before making any decisions.