How Much Retirement Income Can You Withdraw

Transitioning From Building A Retirement Nest Egg To Withdrawing Retirement Income

Retirement lifestyle is all about cash-flow... and not outliving your money.

One of the most important financial decisions you must make when you transition to retirement is how to create a sustainable retirement income and lifestyle out of your retirement nest egg.

Should you:

(1) take flexible withdrawals from the investments that you have accumulated over the years that are subject to market fluctuations,

(2) purchase guaranteed lifetime income solutions, so you do not risk outliving your money, or

(3) implement a combination of flexible withdrawals and guaranteed lifetime income solutions to create a sustainable retirement income and lifestyle.

There are several important moving parts involved in the retirement income planning process – both investment and non-investment related - and they evolve over time.

You may find that the optimal retirement income and lifestyle plan includes a combination of a flexible withdrawal approach and a guaranteed lifetime income solutions approach to achieve your retirement income and lifestyle goals.

Two Inherently Different Mind-Sets

A flexible withdrawal approach to retirement income planning and a guaranteed lifetime income solutions approach to retirement income planning require inherently different mind-sets to structuring your retirement income and lifestyle plan.

When it comes to retirement income planning, you need to ask yourself one simple question:

Do you place greater faith in the stock market's ability to perform well over your retirement time horizon and in both your financial and emotional ability to stick with a flexible withdrawal plan through down markets - or do you place greater faith in guaranteed lifetime income solutions so you are guaranteed to not outlive your money - regardless of what happens in the stock market?

Your answer to this question will help you determine how to build your retirement income and lifestyle plan.

A Flexible Withdrawal Approach To Retirement Income And Lifestyle Planning

What Happens When The Paychecks Stop?

When you retire, the paychecks stop coming and you transition from the Growth Accumulation Phase Of Investing of building your retirement nest egg, to the Income Distribution Phase Of Investing of turning your retirement nest egg into retirement income to sustain your retirement lifestyle.

If pure flexibility and growth is your goal, and you are comfortable with shouldering all of the investment risk in your portfolio, then you may feel more at ease sticking with a flexible withdrawal approach to fund your retirement income and lifestyle.

The primary goal of taking flexible withdrawals from your retirement nest egg is to invest to maximize returns, within your risk attitude, so you will be able to meet your future retirement income and lifestyle goals and not outlive your money.

If you take a flexible withdrawal approach to retirement income and lifestyle planning, you invest and grow your portfolio over time until retirement, whereupon you continue to invest the funds during retirement, and take flexible withdrawals from your portfolio each year over your lifetime to cover your retirement income and lifestyle needs (in addition to Social Security benefits, pension income, part-time work, rental income and so forth).

Your value of your portfolio will go up or down each year depending upon if the withdrawal amount that you distribute from your portfolio is greater than or less than the return on your portfolio.

What's A Safe Amount To Withdraw From Your Investment Portfolio Without Running Out Of Money?

The rate at which you withdraw money from your portfolio can dramatically affect how long your money will last.

The information below shows how long a retirement nest egg of $1,500,000 will last at

different retirement income withdrawal rates.

An initial withdrawal rate of ____ % in the first year of retirement,

adjusted for 3.00% annual inflation COLA (Cost Of Living) thereafter, will last ____ years. *

Percent (%) # Of Years

5% 29 years

6% 22 years

7% 18 years

8% 15 years

9% 13 years

10% 11 years

* This hypothetical illustration is not specific to the performance of any product and assumes a $1,500,000 investment portfolio at age 67, an asset allocation mix of 50% equity + 50% fixed income, with an Average Annual Return of 6.00%. Annual retirement income withdrawals are adjusted by 3% for inflation. Taxes, fees and expenses are not factored into this example.

Assumes Annual Social Security Benefit of $36,000/year ($3,000/month) beginning at age 67, adjusted by 2.00% for COLA (Cost Of Living Adjustment).

These hypothetical examples are for illustrative purposes only and are not intended to represent the performance of any particular investment product. Past performance is no guarantee of future results.

This illustration assumes an Average Annual Return and does not take into consideration the potential consequences of Sequence Of Returns Risk.

The flexible withdrawal approach to retirement income planning will supplement your Social Security Benefits, pension (and SPIAs and DIAs), part-time work, rental income and other sources of income to fund your retirement lifestyle.

Sequence Of Returns Risk

Sequence Of Returns Risk is one of the biggest threats to a sustainable retirement income and lifestyle plan.

The Sequence Of Returns can be more important than the Average Annual Return during the early years of retirement and can make or break your retirement.

During pre-retirement years, investment portfolios with higher Average Annual Returns typically outperform portfolios with lower Average Annual Returns.

However, during early retirement years, when you begin taking retirement income withdrawals to fund your retirement income and lifestyle, you may be surprised to learn that portfolios with lower Average Annual Returns (and lower volatility and drawdowns (losses)) may outperform portfolios with higher Average Annual Returns (and higher volatility and drawdowns (losses)).

Before getting too comfortable relying on the annual withdrawal rates illustrated above that are based on a hypothetical investment and retirement income portfolio with an Average Annual Return of 6.00%, we highly recommend that you review the Sequence Of Returns Risk drop down tab under the Retirement Income section to gain an understanding of Sequence Of Returns Risk and its potential impact on your retirement income and lifestyle plan.

Depending upon the asset allocation, volatility and historical drawdowns (losses) of your portfolio, your estimated longevity and everchanging retirement income and lifestyle variables, you may want to be more conservative and withdraw less, or be less conservative and withdraw more.

A Guaranteed Lifetime Income Approach To Retirement Income And Lifestyle Planning

If you rank guaranteed income certainty higher than investment portfolio performance, than you may feel more at ease with a guaranteed lifetime income solutions approach to fund your retirement income and lifestyle.

The preceding section highlighted how the rate at which you withdraw money from your portfolio can dramatically affect how long your money will last if you take a a flexible withdrawal approach to retirement income and lifestyle planning.

Having more guaranteed income can help optimize an overall portfolio, taking pressure

off withdrawals when they need to be taken, especially during down markets.

And when money is taken out, it can be done more confidently, with less worry, knowing that there will be guaranteed income to rely on throughout your retirement.

Social Security, your pension (if you are lucky enough to have one), Immediate Income Annuities ("SPIA"), Deferred Income Annuities ("DIA") and Qualified Longevity Annuity Contracts ("QLACs") make up the guaranteed lifetime income portion of a long-term investment and retirement income plan.

The primary goal of purchasing guaranteed lifetime income solutions is not to invest to maximize returns but, instead, to maximize the chance of being able to achieve your future retirement income and lifestyle needs and not outlive your money.

The focus is not on the value of your portfolio, or to make as much money as possible - the focus is on guaranteed cash-flow and the ability of your portfolio to meet your retirement income and lifestyle goals for life - regardless of how the stock market performs - and regardless of how long you live.

If you take a guaranteed lifetime income solutions approach, you look beyond the never-ending obsession with investment account balances and annual returns, which are far less important than the amount of guaranteed lifetime income you can expect to receive.

You know exactly what your guaranteed lifetime income will be - each year for the rest of your life - to complement flexible retirement income withdrawals from your investment portfolio.

You can purchase an Immediate Income Annuity ("SPIA) from an insurance company and receive guaranteed income payments for the rest of your life starting immediately to complement your investment portfolio.

You can also purchase a Deferred Income Annuity ("DIA") and receive guaranteed income payments for the rest of your life starting at a specific time in the future to complement your investment portfolio.

Or you can purchase a combination of SPIAs and DIAs to "ladder" streams of guaranteed income for life in addition to Social Security and pensions.

While Immediate Income Annuities and Deferred Income Annuities are not for everyone, they are great transfer of risk strategies that specifically solve for:

(1) principal protection,

(2) guaranteed lifetime income so you don't outlive your money, and

(3) legacy planning.

If you need to solve for one of these items, then you may want to consider adding an Immediate Income Annuity or Deferred Income Annuity to your portfolio to deliver the guaranteed part of your retirement income and lifestyle plan - lower the risk of your overall investment portfolio - and help solve for longevity risk so you don't outlive your money.

We recommend that you review the Immediate Income Annuity and Deferred Income Annuity drop down tabs under the Annuities section on our web site to learn more about SPIAs and DIAs and how you may implement them and create your onw persoanl pension plan.

We recommend that you review the Immediate Income Annuities and Deferred Income Annuities drop down tabs under the Annuities section on our web site to learn how you may implement them into your portfolio and create your own personal pension-like guaranteed income streams for life - completely insulated from the performance of the stock market.

Summary

When it comes to retirement income and lifestyle planning - there are countervailing benefits to taking a flexible withdrawal approach, or a guaranteed lifetime income approach that is not subject to stock market losses.

The greatest financial risk that most retirees face is running out of money.

We can help you structure a flexible withdrawal approach to retirement income planning utilizing our All Weather Investment Models, Buffered ETFs, Buffered Annuities, Multi-Year Guarantee Annuities and Fixed Index Annuities in addition to your investments held elsewhere.

We can also help you structure a guaranteed lifetime income approach to retirement income planning (in addition to Social Security and pensions) utilizing Immediate Income Annuities, Deferred Income Annuities and QLACs.

You may find that the optimal retirement income and lifestyle plan includes a combination of a flexible withdrawal approach and a guaranteed lifetime income approach to:

(1) sustain your desired retirement income and lifestyle needs,

(2) provide the potential for long-term growth and, most importantly,

(3) help solve for longevity risk so you do not outlive your money.

It is important to have a basic understanding of both approaches before committing to a long-term plan that you feel comfortable with - from both a financial as well as an emotional perspective.

Do you know how much money you will need to retire comfortably?

Do you know where your retirement income will come from to sustain the retirement lifestyle you envision?

We will help you answer these questions and achieve your retirement goals.

How Much Retirement Income Can You Withdraw

Transitioning From Building A Retirement Nest Egg To Withdrawing Retirement Income

A Flexible Withdrawal Approach To Retirement Income And Lifestyle Planning

A Guaranteed Lifetime Income Approach To Retirement Income And Lifestyle Planning

Summary

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