Jul 27, 2019
One of the biggest fears for retirees and near-retirees is that your money won’t last in retirement. Making your money last in retirement for possibly 30 years or more, not knowing what lies ahead is daunting. So this week, I’m sharing with you some ideas from my financial planning background and my experience helping many clients make the transition into retirement with confidence, in order to help you better understand your chances of running out of money in retirement.
One very important factor in determining whether or not you will run out of money in retirement is your portfolio returns. If your portfolio averages 2-3% annual return because you just invested in cash, CDs, and Treasury bonds in a low interest rate environment, you’re more likely to run out of money if those flatline returns don’t keep up with your portfolio withdrawals.
On the other hand, you would probably love to make 8-10% a year or more by being invested in a portfolio that’s 100% in stocks. But I’m guessing that the idea of losing half of your nest egg in a really bad recession, is a no-go as well.
So we have to invest in an investment portfolio that will be well-balanced. Not too risky. Not too conservative. As goldilocks would say…”Just right”.
Well, that just right amount depends on a lot of factors, most notably your age, your income needs, and the thickness of your skin in withstanding the inevitable portfolio fluctuations. But it’s important that you do have the right amount of stocks and bonds and cash that can support your withdrawal rate in retirement.
At True North, we have guidelines for asset allocation based on age that we use as a starting place for determining the right mix of stocks and bonds for each client. If you want a copy of our age-based asset allocation cheat sheet, just email me - ashleym@truenorthra.com. That’s ashleym@truenorthra.com.
That’s it for today. Thanks for listening. Tomorrow, we’re going to recap the week and I’m going to give you a little preview of next week’s theme.
My name is Ashley Micciche and this is the One Minute Retirement Tip.
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