In the last post “Is 2 Percent the New Safe Retirement Withdrawal Rate?”, we explored how some experts have knocked the conventional 4% retirement withdrawal rate in favor of figures as high as 7% and low as 2%. In conclusion, I demonstrated using a simple linear example how I thought a 3% withdrawal rate with an assumption of 6% growth was my personal preference. My reasoning was because it offered a high probability for steady returns and seemed to maintain portfolio integrity even after adjustment for inflation.
So what’s the problem?
• Rule of thumb calculations are okay for estimations. But in real life, they hardly ever play out the way they do on paper. Think about it. In our previous example, the portfolio always grew year over year by 6%. But portfolios don’t go up and up forever. And when they go down, they can have a bigger impact on your portfolio than you’ll expect.
When planning for retirement, it’s not just about how much you money you save up. One of the most important variables to consider is what’s called the safe retirement withdrawal rate – how much money you’ll withdraw each year to live off of. To take too much may drain your nest egg and leave you with nothing. To take too little may curb your lifestyle more than you’re use to.
I am very glad to be home from western NY. This week MMD was on the road away on business for the latter part of the week. My apologies for not being able to post like I regularly do on Friday.
The first time I watched the Oliver Stone movie Wall Street 2, I was confused about something: Josh Brolin’s company, Churchill Schwartz, makes a ton of money when the company that Shia LaBeouf works for, Kellar Zabel (KZI), starts to dramatically fall in stock price.
This has been one of those weeks where it feels like extra days got mixed in there somehow.
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