Rethinking Traditional Retirement Beliefs

This may be true during your accumulation years when you have a long time frame. However it is a different scenario during your distribution years. When creating income during a down market, more shares will have to be sold to create the equivalent income, leaving less shares (and investment) to come back when the market recovers. Managing volatility, not just returns, becomes much more important during your retirement years. The question isn't if the market will come back, but will your money come back?

The old rule of thumb was that during retirement you will only need 70% of your current income. This may or may not be true as every retirees circumstance is different. One thing to keep in mind is the ever changing landscape of taxes. You may no longer be able to claim child tax or mortgage deductions (if mortgage is paid off). Additional items to consider are possible higher medical bills, future long term care needs and the devastating effect of inflation (the rising cost of goods and services). Especially since people continue to live longer, it may be time to revisit this old cliche'.

Investments should be managed differently as someone transitions from the accumulation phase into the distribution phase. Trying to create predictable income, in an extremely volatile market, by managing return can be very daunting and risky. Most Financial Professionals will tell you that a 4% withdrawal rate is the maximum someone should take to reduce the risk of running out of money. Even withdrawing that small of a percentage is not guaranteed. When you're trying to create income and the inevitable market downturn hits, will you have the time frame and the assets to recoup substantial losses? We believe income distribution strategies should be managed differently from asset accumulation strategies. This is the cornerstone of our RS Process: your Retirement Survival guide.