Withdrawal Rates Have A Dramatic Impact On How Long A Portfolio Can Last

How much money you think you need to live on during retirement will determine your withdrawal rate and ultimately how long your portfolio can last in retirement. Retiring with a larger pool of savings, postponing retirement or reducing your withdrawal rate may help extend the life of your retirement portfolio.

 

Age to which the portfolio may last, based on withdrawal rate

Age to which the portfolio may last, based on withdrawal rate


IMPORTANT: Projections generated by Morningstar regarding the likelihood of various investment outcomes using the Ibbotson Wealth Forecasting Engine are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary over time and with each simulation. This is for illustrative purposes only and is not indicative of any investment. An investment cannot be made directly in an index. © Precision Information, dba Financial Fitness Group. All Rights Reserved. Source: Morningstar

 

Your Asset Allocation During Retirement

Market performance during your retirement years will impact the value of your portfolio and subsequently how long your money will last. While future market performance cannot be known, how you allocate to stocks, bonds and cash will determine your exposure to various market risks.
 

Inflation Reduces Your Purchasing Power

As we know, everyday items can get more expensive over time. If past trends continue, a dollar today is likely to be worth less when you retire. Together with your financial professional, you can incorporate potential price increases into your retirement strategy.

 

The effect of inflation on everyday costs ($)2

The effect of inflation on everyday costs ($)

Social Security Benefits are Not Enough

While Social Security benefits account for 33% of the average income for the elderly, the average monthly Social Security benefit payment for retired workers is just $1,471 7 - and this amount may decline in the future as the ratio of workers paying into the system to retirees collecting benefits continues to fall.
 

2 Projected prices were based on a 3.2% rate of inflation. 

3 Trends in College Pricing, Average Tuition and Fees and Room and Board (Enrollment-Weighted) in Current Dollars, 1971–1972 to 2019–2020. The College Board, collegeboard.org. 

4 U.S. Department of Commerce, Bureau of Economic Analysis: Auto and Truck Unit Sales, Production, Inventories, Expenditures, and Price (www.bea.gov).

5 U.S. Bureau of Labor Statistics. Consumer Price Index–Average Price Data, Milk, whole, fortified.  

6 U.S. Census Bureau. Median and Average Sales Prices of New Homes Sold in United States (www.census.gov/construction/nrs/pdf/uspricemon.pdf).

7 Social Security Administration. Social Security Basic Facts, June 2019.
(https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf).


Your financial professional can help you develop a long-term investment plan with a balance of strategies that addresses your need for portfolio growth, income, capital preservation and risk management.

 

 

All investments involve risk, including possible loss of principal. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges.

Equity investments generally provide an opportunity for more capital appreciation than fixed income investments, but they are subject to greater market fluctuations.

Diversification does not assure a profit or protect against market loss.

Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.