Sequence of returns risk refers to the possibility that people who experience a stock market downturn in the first three to five years of retirement may deplete their savings prematurely if they take withdrawals from their portfolios while the market is going down. What does this mean? Let’s look at some examples. Remember, most financial advisors out there are still telling their clients that when they retire, the extent of their “retirement plan” should be to start withdrawing 4% of their retirement portfolio annually to cover their monthly living expenses. However, even if they recommend a more conservative 3% or
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For most Americans, gone are the days of the reliable company pension for retirement. Today’s retirees are faced with saving up money in tax-deferred accounts like 401(k)s, then after they retire, being left to figure out how to withdraw money correctly so they don’t run out of money in retirement. Not to mention having to navigate complex income tax issues as they make required annual withdrawals starting at age 72! Meanwhile, retirees face record inflation, threats to Social Security solvency and Medicare premium increases. With longer life expectancies than any generation that ever lived before, annuities can provide a way
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