Sequence of returns risk & safe withdrawal rates in retirement
While accumulating money before retirement, average returns matter, 5% is better than 4% and 6% is better than 5%. The day you retire and start distributing money from your retirement portfolio, average returns no longer matter, it's the "sequence of returns" that matters and it can have a devastating effect on your retirement outcome. Once you start drawing down your retirement money, you will experience the consequences of the sequence of returns risk. The "sequencing risk” impact is usually most significant at the time of retirement. This situation reflects the dual challenges of market risk and the potential of living longer than expected. Therefore, any well-designed retirement plan typically contains a strategy to defend against such a threat. Until recently, many financial advisors have been comfortable recommending the traditional "4% withdrawal rate." However, experts are now concerned that the 4% rule may not be appropriate in the unprecedented economic times of simultaneously high asset valuations and low-interest rates. Many advisors now recommend a withdrawal rate of 3% or lower.
One method to address the risk of running out of money and one that is becoming more common is outsourcing to a risk bearer, a risk bearer is an insurance company. This design typically uses a Guaranteed Income Annuity that provides a lifetime payment stream that can never be outlived. The payout rates are 6.5% to 7.5% guaranteed, much higher than the traditional so-called safe withdrawal rate of 4% or less.
Safe money guaranteed income sources make retirement planning much easier and a lot less stressful.
If you are IN or NEARING retirement, Give me a call today for a no obligation consultation 910-485-7166.
One method to address the risk of running out of money and one that is becoming more common is outsourcing to a risk bearer, a risk bearer is an insurance company. This design typically uses a Guaranteed Income Annuity that provides a lifetime payment stream that can never be outlived. The payout rates are 6.5% to 7.5% guaranteed, much higher than the traditional so-called safe withdrawal rate of 4% or less.
Safe money guaranteed income sources make retirement planning much easier and a lot less stressful.
If you are IN or NEARING retirement, Give me a call today for a no obligation consultation 910-485-7166.
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