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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%)!
Sunday Night Futures
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12 comments:
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? ;)
I remember in 2008 super high oil prices were a sign of a robust economy firing on all cylinders.
Stag,
I'm thinking the drag from high oil prices has been offset by declining real incomes.
"High oil prices have dented economic growth, despite significant quantitative easing from the Federal Reserve."
They are the trend line masters!
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.
Despite Despot Bernanke's Despised QE...
Oops, freudian train crash.
I'd suggest 100% withdrawal... just don't spend it!!! ;-)
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.
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
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.
Isn't the bear market already withdrawing from my balance before I can?
Charles Kiting,
If you put $401k into it in 2000, then you still have about $401k. That's assuming little Nasdaq exposure of course! ;)
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