home | banking | car | college | credit/credit card | economy | home/mortgage | insurance | investment | retirement | spending | tax | et cetera

November 28, 2004 07:15 AM

To Yield A Good Retirement, Get Real, And Work It Out


Excerpt: The idea that you might run out of money in retirement is scary. Fortunately, there is a lot you can do both before and after you stop working. The most important step: Calculate your withdrawal rate, which is the amount you can afford to take out of your mutual funds and other savings.


Millions of workers are counting on mutual funds to help pay their retirement bills, but it will not be easy to make your money last as long as you do.

The idea that you might run out of money in retirement is scary. Fortunately, there is a lot you can do both before and after you stop working.

The most important step: Calculate your withdrawal rate, which is the amount you can afford to take out of your mutual funds and other savings. Only then will you know whether you will have enough to supplement other income sources, like social security and corporate pensions. You will probably find that your safe withdrawal rate is lower than you may have hoped.

Some retirees assume that they can spend the profits they earn on their investments each year. But that approach has problems. What will you live on during a bear market, when your investments may be losing money?

Other retirees settle on a fixed withdrawal rate roughly equal to their portfolio's projected returns. "That's a very dangerous thing to do," said Philip Cooley, professor of finance at Trinity University in San Antonio, Texas.

One reason: The market often generates returns that are significantly different from the long-term averages. Investors who use this withdrawal strategy could see a few years of below-average performance derail their retirement savings plans.

Read Full Story ...



Social Security COLA Increase Looks Puny (December 02, 2004)
SOCIAL Security will save billions of dollars in cost of living increases because of a fortuitous decision in September by the people who compile the nation's inflation numbers. But if you look at the figures that determine how much of a raise retirees get each ...
No More IRA Leniency (November 29, 2004)
Have you made your required withdrawal this year from your IRA? For the first time, Uncle Sam is watching. Most people are familiar with the rules regarding "required minimum distributions" from individual retirement accounts. Once you hit age 70½, you must begin making annual withdrawals ...
Social Security Reforms On The Way? (November 26, 2004)
President Bush has pledged to move quickly in the New Year to overhaul Social Security but the White House is still debating the best way to reform the creaking system, administration officials and Republican sources say. While a campaigning Bush called for allowing young workers ...
Some New Ways To Preserve Your Retirement (November 23, 2004)
Insurance companies and mutual-fund firms are rolling out a dizzying variety of annuities and other products targeted to people worrying about running out of money in their retirement. MetLife Inc. in September introduced what it calls "retirement-income insurance," essentially an annuity you buy now that ...

Read all 23 posts in the same category of Retirement:

Bush Says Social Security Plan Would Reassure Markets - Dec 17, 2004
Are You Ready To Retire? - Dec 13, 2004
Last-Minute Retirement Planning - Dec 12, 2004
Small Change Adds Up To Big Savings - Dec 09, 2004
Bush To Borrow To Fix Social Security - Dec 07, 2004
Moving Smoothly Into Retirement - Dec 07, 2004
Get Healthy, Get Wealthy - Dec 06, 2004
Five Books to Retire By - Dec 05, 2004
Tax Policy Promotes Early Retirement - Dec 02, 2004
Fidelity Analyzes Pension Performance - Dec 02, 2004
Social Security COLA Increase Looks Puny - Dec 02, 2004
No More IRA Leniency - Nov 29, 2004
Social Security Reforms On The Way? - Nov 26, 2004
Some New Ways To Preserve Your Retirement - Nov 23, 2004
Living Trust Offers: How to Make Sure They're Trust-Worthy - Nov 22, 2004
How to Forecast a Lifespan - Nov 21, 2004
Be Happy, And Put Retirement Fears to Rest - Nov 21, 2004
Seven Ways to Stop Saying 'Oops!' - Nov 21, 2004
Retirees Don't Have to Be So Frugal: A Case for Withdrawing Up to 6% a Year - Nov 17, 2004
How to Avoid Living Like a Poor Student at Age 70 - Nov 09, 2004
What Social Security Might Look Like - Nov 09, 2004
Are You Retirement Ready -- Or Not? - Nov 03, 2004