The 4% Retirement Income Solution

What is your plan for retirement income? Traditional asset management with a 4% annual distribution is a popular idea with professional advisors and consumers alike. New research from the Merrill Lynch Wealth Management Institute suggests this approach to be far too simple. An article published last week in Smart Money covers many of the potential problems with the 4% solution. Read the article here.

The author claims the biggest issue with the 4% distribution rule is that it doesn’t address the major risks retirees actually face. Longevity risk, sequence of returns risk(reverse dollar cost averaging) and asset allocation risk are just a few of those mentioned. If you’ve been following us for long you’ll know that we tend to agree with the assertion.

When you consider that age and gender are significant factors when devising an income strategy, it’s easy to see why there is no such thing as single plan or rule that can work for everyone, as mentioned in the Merrill Lynch study. Additionally there are a multitude of other factors that will affect your strategy so designing a plan that works will cost a lot of time and money. And even so there are no assurances offered.

I’m not going to rewrite the article but I do suggest you take a look at it to see what the exact risk factors are and how changing one can substantially affect the others. Education and understanding are critical to making decisions that will last a lifetime. There’s no way anyone can afford to make a mistake here.

We are obviously fans of guaranteed income. I personally think that keeping income and growth assets separate is a pretty dang good idea. Why worry about it for the rest of your life? When you’re ready for a discussion about the difference between asset management and income planning, simply contact us so we can help make sense of it all.

Have a great week!

Bryan J. Anderson
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Written By

Bryan Anderson

Bryan Anderson is a licensed insurance producer and a career finance specialist. With Mr Pulsifer, he started Annuity Straight Talk to bring his unique views on guaranteed retirement income and planning to a wide audience. He enjoys working with investors around the US from his offices in NW Montana.

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