Monday, July 18, 2011

The Sarcasm Report v.115

July 15, 2011
Dealing With Retirement Withdrawals in Bear Market

Financial planners traditionally suggested a simple rule of thumb: To avoid exhausting nest eggs, retirees should only withdraw about 4% of assets in the first year of retirement.

Okay, that's the traditional approach. So what does one do in a bear market? That is the title of the post. Right?

Investors can take initial withdrawals of more than 4% in an approach developed by Jonathan Guyton, a financial planner with Cornerstone Wealth Advisors in Edina, Minn. Guyton said that if you have 65% of your assets in stocks, you can take an initial withdrawal of up to 5.6% -- provided that you are prepared to trim withdrawals in hard times.

You're entering retirement. You've been participating in the stock market for the last decade. You think it's been in a long-term bear market. You're concerned that it will continue. That's why you are reading this article. Traditionally, you might have started with a 4% withdrawal. You're smarter now though. You're trying to factor in what long-term bear markets can do. So what's the safe solution?

Increase your initial withdrawal by 40% of course (from 4.0% to 5.6%)!


12 comments:

Stagflationary Mark said...

Here's a priceless quote from TD Ameritrade today (as seen in my email inbox).

High oil prices have dented economic growth, despite significant quantitative easing from the Federal Reserve.

Despite? ;)

getyourselfconnected said...

I remember in 2008 super high oil prices were a sign of a robust economy firing on all cylinders.

mab said...

Stag,

I'm thinking the drag from high oil prices has been offset by declining real incomes.

Mr Slippery said...

"High oil prices have dented economic growth, despite significant quantitative easing from the Federal Reserve."

They are the trend line masters!

getyourselfconnected said...

Despite QE from the FED, unemployment is still near 10%, incomes are falling, food stamp usage at all time highs, and you have to pay a bank to hold your money. Obviously we need MORE QE! This economic management stuff is easy.

Stagflationary Mark said...

Despite Despot Bernanke's Despised QE...

Oops, freudian train crash.

tj and the bear said...

I'd suggest 100% withdrawal... just don't spend it!!! ;-)

Stagflationary Mark said...

tj and the bear,

Money floods into stocks as money floods into treasuries!

Prosperity here we come.

5-year TIPS yield now -0.57%, which is a pure indication of our future prosperity no doubt.

GawainsGhost said...

Hey, Mark, if the government can take your house, for no reason, it can also take your gold, for no reason.

Read these two reports.

http://www.nbcphiladelphia.com/news/local/Philly-Family-Fights-US-Over-Multi-Million-Dollar-Coins-125084784.html

http://www.nbcphiladelphia.com/news/local/Heirs-Lose-Fight-With-Government-to-Keep-Dads-Rare-1933-Gold-Coins-125908579.html

Stagflationary Mark said...

GawainsGhost,

Interesting. Apparently possession is no longer nine-tenths of the law.

Greenspan did say that nothing was safe.

Monty Python - Army Protection Racket

You've got a nice army base here colonel. We wouldn't want anything to happen to it.

Chalres Kiting said...

Isn't the bear market already withdrawing from my balance before I can?

Stagflationary Mark said...

Charles Kiting,

If you put $401k into it in 2000, then you still have about $401k. That's assuming little Nasdaq exposure of course! ;)