You have finally made it to retirement. You saved your money and now it’s time to take withdrawals to provide an income stream to you during your retirement years. The question is “how much can I take without depleting my funds before I die?” This is a dilemma facing many retirees today.
There have been numerous studies done on this subject. The most recent that I have seen was done by Trinity University and is called “The Trinity Study”. The underlying premise is that if certain withdrawal rates could provide lifetime income based on historical market data and returns the withdrawal rate will also be sustainable in the future. I have reviewed this study and while it makes many great points, no study is foolproof when it comes to investing. Everyone has a different situation and each portfolio should be tailored to meet the specific needs of each client. The Trinity study runs scenarios based on asset allocation between stock and bonds and time during retirement taking withdrawals at percentage rates ranging from 3 to 12 percent.
One thing is certain; there is no absolutely correct answer. In my experience, over the last 19 years of helping people reach their retirement goals and then guiding them during their retirement years, flexibility is the key. The market changes constantly and as investors, we need to be willing to adapt to these changes. The time of investing in bonds at 12% is over for now. We may never see this again. You need to have the proper asset allocation during retirement and that will change based on interest rates. If you would like to discuss this further please call or email me.