Retirement planning has often been compared to trekking up a mountain (i.e., your savings years), and then working your way down the other side (which represents your “decumulation,” or income generating years).
In this scenario, any accomplished hiker knows that the equipment and strategies you use can literally make or break the entire expedition. They also are well aware that getting to the mountain-top is actually less than half the battle – and that climbing down safely is essentially where the rubber meets the road (hypothetically speaking).
Trading in the 4% Rule for an Upgraded Strategy
Years ago, many retirees relied on an income strategy that is referred to as the 4% Rule. Simply put, this method of income generation refers to withdrawing 4% of one’s portfolio and using it for income, while the remainder of the assets continues to grow.
Using this concept, it was determined that, even when adjusting the dollar amount for inflation each year, a “paycheck” could continue being generated for roughly 30 years.
“On paper,” this is a really great concept – and if it actually worked like it was supposed to work – what a wonderful world it would be!
But again, we go back to what should be and what actually is.
In fact, after being tested over and over again – in both the United States and around the world – it was determined that the 4% Rule would actually fail more than half the time.
In other words, using the 4% Rule concept, more than 50% of the time, an investor’s portfolio would run out of money.
Now I don’t know about you, but when it comes to my income in retirement, having less than 50 / 50 odds would not necessarily equate to an enjoyable lifestyle. Rather, I’m fairly certain that it would lead to a whole lot of sleepless nights!
Modernizing – Or Replacing – the 4% Rule
Today, roughly 25 years after the 4% Rule was initially developed, experts recognize that this concept is in desperate need of modernization – starting with the fact that one of the key issues of this rule is that there are just simply too many unknowns in the overall mix.
For instance, just some of these include:
- How long will the retiree live?
- How will the financial markets perform – both in the short- and long-term?
- Which direction are interest rates headed?
- What are the retiree’s expenses, both now and in the future?
- How will expenses change over time – including health care related costs?
- How will taxes impact the net income received?
Given this myriad of questions – all of which cannot be definitively answered – it may make more sense to rely on an income generator that will continue to provide a known about of cash flow, month in and month out, regardless of what happens in the stock market, with interest rates, or even in the economy overall.
This is where the Annuity Gator comes in.
Ruling Out Retirement Income Mysteries
Today, many retirees – and those who are preparing for retirement – are opting for income strategies that provide guarantees, even in light of a long list of unknowns. An annuity, for instance, can provide you with a lifetime income stream, regardless of how long you may need it.
Many of these products also offer waivers for nursing home care, terminal illness, and other possible situations…just in case.
If you’d like to see what’s possible in terms of reliable, ongoing, and guaranteed incoming cash flow, contact us using our secure contact form and we’ll walk you through various scenarios, based on your specific situation and financial goals.