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%)!

at

12 comments:

  1. Stagflationary MarkJuly 18, 2011 at 2:58 PM

    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? ;)

    ReplyDelete
  2. EconomicDisconnectJuly 18, 2011 at 3:29 PM

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

    ReplyDelete
  3. mabJuly 18, 2011 at 3:52 PM

    Stag,

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

    ReplyDelete
  4. Mr SlipperyJuly 18, 2011 at 3:55 PM

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

    They are the trend line masters!

    ReplyDelete
  5. EconomicDisconnectJuly 18, 2011 at 5:36 PM

    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.

    ReplyDelete
  6. Stagflationary MarkJuly 18, 2011 at 6:19 PM

    Despite Despot Bernanke's Despised QE...

    Oops, freudian train crash.

    ReplyDelete
  7. TJandTheBearJuly 18, 2011 at 9:43 PM

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

    ReplyDelete
  8. Stagflationary MarkJuly 19, 2011 at 2:11 PM

    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.

    ReplyDelete
  9. GawainsGhostJuly 20, 2011 at 4:48 PM

    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

    ReplyDelete
  10. Stagflationary MarkJuly 20, 2011 at 5:13 PM

    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.

    ReplyDelete
  11. Chalres KitingJuly 21, 2011 at 9:39 AM

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

    ReplyDelete
  12. Stagflationary MarkJuly 22, 2011 at 2:33 AM

    Charles Kiting,

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

    ReplyDelete