As people enter retirement, the above question weighs on them. Most, if answering honestly, would say, “I am not sure”. Some of the factors that influence the outcome are: How long you are going to live? What will inflation be? How are your assets allocated and how much of your earnings do you get to keep after taxes? After doing this for many years, I have found that there are a few holes in most people’s thinking. They include:
- Most people underestimate how long they will live
- Most people overestimate how much they can withdraw
- Most people do not achieve market rates of return
- Most people do not control income taxes
The above factors impact whether your money will last during retirement. There is a good chance a married couple aged 60 will need their money to last 30+ years. Based upon statistical probability studies, one can withdraw 3-5% of one’s investment portfolio and have it last 30 years. This means for every $1,000,000 of financial assets, one can withdraw $30,000-$50,000 a year. This does not take into account shrinkage due to income taxes or the fact that most investors do not achieve market rates of return. It is my experience that a customized plan to address all of the above issues must be in place to be confident that your investment funds will be there as long as you are. Click on the link to learn more about the above study, Withdrawal Rates – The Long-Term Impact. Contact my office if you would like me to sit with you and help you figure this out.
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