Click here to read the "Rethinking Retirement" Whitepaper.
Recent research that Dr. Wade Pfau and I have conducted finds that investors retiring as of January 1, 2015, who pursue a traditional 4% withdrawal rate from their savings to fund retirement have a more than 50% chance of outliving their savings. Last month in Financial Advisor, we detailed our research on safe withdrawal rates for retirees and the findings that could disrupt the current idea about what savings can safely be generated during a person’s retirement. Taking into account the person’s investment decisions, the real safe withdrawal rate is much closer to 2% and could be lower.
But we also believe that understanding investor behavior is key to understanding the withdrawal figure.
How many of your clients fear outliving their money, and how many of them fear dying? In a recent national survey of more than 1,100 retirees and pre-retirees between the ages of 50 and 65, the fear is resounding: More than 70% of these respondents fear outliving their assets, while only 30% fear dying. Simply stated—investors had tremendous anxiety about the prospect of outliving their funds.
It’s important to show your clients that the fears of dying and outliving assets are essentially in conflict, and you must address these concerns as you frame the situation for them and show them how their spending and investing patterns will allay their fears and affect outcomes.
Dynamic Withdrawal Rule—Simplified
October 1, 2015
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Comments
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God loves us all and loves dynamic withdrawal rule too...
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I am glad to see that so many thoughtful advisors have dismissed annuities as the solution for almost anyone facing or in retirement. it's marketing pure and simple. the concept is great but you give the money now plus fees and maybe you get the annuity (which is not inflation adjusted) and maybe the insurance company goes out of business at some point (usually the one that gave you the best rate). Advisors (most of them) are smarter than most people give them credit for.
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pughman, it's not a tool, it's a sales product clear and simple. yep, annuities have been around since henry the 8th. Henry didn't have life expectancies and medical breakthroughs which we have today. Watch what happens if the boomers owning annuities live much longer than actuarially assumptions currently estimates. then the dirt is going to hit the fan. It'll be no different than what occurred with LTC insurance and social security. yep, socialize the losses, fat commissions to the capitalists!!!
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annuities have been around for hundreds of years - henry the 8th - issued them - its about the risk of running out of income
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low interest rates - market turbulence - flat returns n market over last 15 years how can annuitiesrajoke dismiss any tool that might help - especially getting mortality bonus - i.e the older you are the more you get - i don,t see munis yields proving income - without increase risk -annuities are neither good or bad - just a tool - and just because the balence is investedfor" long term appreciation" doesn't mean it will -sequence of return
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As soon as I saw "annuities" in the article, I knew it was time to stop reading. This past week, I met with another "satisfied annuity" purchaser who would have been much better off buying a muni-ladder for a majority of what he committed to the product and with the remaining piece invested in the market for long-term appreciation. To say he was angry, is an understatement. Annuities will be the WMD for the boomer generation......