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Once you're retired, how
will you determine how much you can withdraw without running out of money?
This could be the most difficult financial decision you'll make.
I'm assuming you have already gifted to your heirs and you want to spend
the remainder on yourselves.
First, what's the point of accumulating a large enough sum of money if one catastrophe can wipe it out? Manage your risks. Consider a long-term care policy to help with nursing home costs (don't forget the assisted living/at home provision). Do you have 'umbrella' liability insurance on your residence? Once your assets are properly protected, then you can focus on withdrawal decisions. Next, shifting your portfolio to an all-income strategy through bonds, etc. will prove deadly. You must position your portfolio for total return because during 20+ years of retirement, you'll have to double your income to offset the ravages of inflation. |
You'll need to
make several assumptions including your portfolio return (based on historical
averages, not recent history), inflation rates, tax bracket, lifestyle
choices, and increased medical expenses.
There are plenty of software packages, and mutual fund companies that purportedly can do this for you, but neither can personalize the outcome and many of the software's assumptions can't be modified. To make your numbers work, you may have to make some unsustainable assumptions or take on unnecessary investment risk. You may have options available to you which are unique to your situation that the software or mutual fund company can't possibly consider. A financial advisor can guide you through this process to arrive at the best possible solution for you. And if something unexpected happens, an advisor can help reevaluate your options since, luckily, some of your decisions will not be set in stone. |
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