Archive for the ‘Retirement’ Category
Retirement income: What’s wrong with the 4% rule
Posted: November 10, 2012 at 3:50 pm
When you finally reach your retirement date, one of your first questions will be: How much of my savings can I spend?
The standard rule of thumb for many years was 4%. Thats how much you supposedly could withdraw every year from your retirement accountseven on an inflation-adjusted basisand not run out of money.
Well, today, the conventional wisdom looks less clear. That rule of thumb, which was originally based on research done by Bill Bengen in 1994, has been scrutinized, criticized and even improved upon by many, including the likes of David Blanchett, the head of retirement research at Morningstar Investment Management.
The good part about the 4% rule is (that) it fixes your income through time, said Blanchett, who along with Farrell Dolan, a principal with Farrell Dolan Associates and John Olsen, the president Olsen Financial Group, spoke at a recent MarketWatch Retirement Adviser event in New York City. Its increased every year by inflation, but its based upon the initial value.
But the problem with that approach is that its based on a single point in time. You make the decision once, and you follow it for your entire retirement, said Blanchett, who recently co-authored a white paper on the subject of optimal withdrawal strategies for retirement-income portfolios. And thats kind of sub-optimal, because if we think about what happens when you move through time is things change. So as you age, youre going to live longer, potentially. If the markets go down, you could take out less income. ..The key to the 4% rule is that first its kind of a very basic starting point.
According to Blanchetts white paper, a significant amount of research has been devoted to determining how much one can afford to withdraw from a retirement portfolio, but surprisingly little work has been done on comparing the relative efficiency of different types of retirement withdrawal strategies.
In his study, Blanchett established a framework to evaluate different withdrawal strategies and then used that framework, in conjunction with Monte Carlo simulations, to determine the optimal withdrawal strategies for various fact patterns. Then he developed whats called the withdrawal efficiency rate, a measure that allows researchers to quantify the relative appeal of each withdrawal strategy to determine which one is best for generating retirement income.
Read Blanchetts paper.
As part of his study, Blanchett examined five different types of withdrawal strategies and found that the primary method employed by many (advisers), where a constant real dollar amount is withdrawn from the portfolio until it fails, is often the least efficient approach to maximizing lifetime income for a retiree.
So whats the best withdrawal strategy? According to Blanchett, the best one incorporates mortality probability, where the projected distribution period is updated based on the mortality experience of the retiree (or retirees) and the withdrawal percentage is determined based on maintaining constant probability of failure. Blanchett explains it this way in plain English: Every year the retiree is alive, figure out how much longer the retiree (or retirees) is (are) going to live. This is the mortality updating part. You do it every year because the longer you live the longer you are likely to live. An example is: The average life expectancy for a new born is something like 74 years. The average life expectancy for someone 65, though, is 85. This difference of 11 years (age 85 vs. age 74) is based on the fact that if youve survived to age 65 you are likely to live longer.
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Retirement income: What’s wrong with the 4% rule
Damon K. Roberts – Closing Remarks At SPHINC’s Second Debate – Video
Posted: November 8, 2012 at 11:46 pm
Damon K. Roberts - Closing Remarks At SPHINC #39;s Second Debate
Friday, April 22, 2011 Damon K. Roberts #39; closing remarks at the South Philadelphia HOMES Inc. second debate at Mt. Zion Pentecostal Church in Philadelphia. ----- Damon K. Roberts: bull; Husband and Father of two sons. bull; Real Estate Attorney, Small Business Owner. bull; Former High School Teacher and Coach. bull; Block Captain, Democratic Committee person. bull; Graduate of Harvard University and Howard University School of Law. Damon K. Roberts #39; Vision For Philadelphia: bull; Reduce Crime and Promote Clean Neighborhoods. bull; Increase Graduation Rates and Sponsor Positive Recreation to Engage Youth. bull; Promote job creation by supporting existing businesses and bringing new businesses to Philadelphia. bull; Sell City-Owned Vacant and Abandoned Properties. bull; Protect and improve the quality of life for senior citizens. bull; Restructure the City of Philadelphia #39;s Deferred Retirement Option Plan (DROP). Be a part of Team Roberts! Friends of Damon K. Roberts Post Office Box 6461 Philadelphia, Pa. 19145 Campaign Office: 1543 Dickinson Street (Corner, 16th and Dickinson Street) Philadelphia, PA. 19146 267-702-3111 http://www.damonkroberts.com E-mail: info@damonkroberts.com facebook.com/DKR2011 twitter.com/damonkrobertsFrom:WideEyedPicturesViews:34 0ratingsTime:03:48More inNews Politics
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Damon K. Roberts – Democrat For Philadelphia’s City Council – Video
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Damon K. Roberts - Democrat For Philadelphia #39;s City Council
Damon K. Roberts: bull; Husband and Father of two sons. bull; Real Estate Attorney, Small Business Owner. bull; Former High School Teacher and Coach. bull; Block Captain, Democratic Committee person. bull; Graduate of Harvard University and Howard University School of Law. Damon K. Roberts #39; Vision For Philadelphia: bull; Reduce Crime and Promote Clean Neighborhoods. bull; Increase Graduation Rates and Sponsor Positive Recreation to Engage Youth. bull; Promote job creation by supporting existing businesses and bringing new businesses to Philadelphia. bull; Sell City-Owned Vacant and Abandoned Properties. bull; Protect and improve the quality of life for senior citizens. bull; Restructure the City of Philadelphia #39;s Deferred Retirement Option Plan (DROP). Be a part of Team Roberts! Friends of Damon K. Roberts Post Office Box 6461 Philadelphia, Pa. 19145 Campaign Office: 1543 Dickinson Street (Corner, 16th and Dickinson Street) Philadelphia, PA. 19146 267-702-3111 http://www.damonkroberts.com E-mail: info@damonkroberts.com facebook.com/DKR2011 twitter.com/damonkrobertsFrom:WideEyedPicturesViews:454 6ratingsTime:05:05More inNews Politics
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Highway To Heaven Part 1 (01×01) – Video
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Highway To Heaven Part 1 (01x01)
Sep. 19, 1984 Highway to Heaven: Part 1 Jonathan Smith, an angel, arrives at a retirement home to help not only the occupants but also the administrator Leslie Gordon. However, Leslie #39;s brother Mark, a jaded and bitter former police officer, is suspicious of Jonathan.From:TvDona2012Views:0 0ratingsTime:45:11More inFilm Animation
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brian dawkins – Video
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brian dawkins
retirement ceremonyFrom:TheMrbeastasaurusViews:0 0ratingsTime:00:43More inPeople Blogs
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Homestead Village Pensacola FL – Video
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Homestead Village Pensacola FL
Homestead Village Pensacola FL http://www.localedge.com Assisted Living, Dementia Care, Alzheimer #39;s Care, Extended Care Living, Independent Living, and Retirement Community.From:LocalEdge2Views:0 0ratingsTime:01:26More inPeople Blogs
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Goodbye Mr Abbott! – Video
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Goodbye Mr Abbott!
a goodbye message to our maths teacher, Mr Abbott. Happy retirement! ps, sorry for the watermark in the middle, i didn #39;t realise i was using an illegally downloaded video editor..From:Faye181195Views:0 0ratingsTime:05:35More inPeople Blogs
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Goodbye Mr Abbott! - Video
OBAMA IS SO F*CKING LEGIT – Cartoon – Video
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OBAMA IS SO F*CKING LEGIT - Cartoon
I made this cartoon, so enjoy bitches. Im back from my retirement http://www.youtube.com SubscribeFrom:NippleJamViews:32 1ratingsTime:00:22More inFilm Animation
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Live Your Retirement Dream – Bucket List – Video
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Live Your Retirement Dream - Bucket List
Many Baby Boomers and retires have a Bucket List of goals and dreams to fulfill. The questions is when will they start to plan to live their retirement dream and cross off items on their Bucket List?From:Sue FerreiraViews:0 0ratingsTime:00:38More inEntertainment
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Heilig – A trailer for the new short film by Steven Hatton – Video
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Heilig - A trailer for the new short film by Steven Hatton
A meditative story of a parent child relationship, Heilig offers an intimate portrait of Jewish Kindertransport refugee Gerhard Heilig, now 85 and living in retirement in Vienna. Heilig explores not only Gerhard #39;s own escape from Nazi Austria but the imprisonment at Dachau and Buchenwald concentration camps of his father, Bruno Heilig, an anti-nazi political journalist and later, writer of one of the first eyewitness accounts of life in the concentration camps. FESTIVALS SCREENINGS: Branchage Film Festival (Jersey UK) 22-25th Sept 2011. Vancouver Jewish Film Festival (Canada) November 2011. Warsaw Jewish Film Festival (Poland) November 2011. London Short Film Festival (UK) 14th Jan 2012. Lincoln Drill Hall (UK) 17th Jan 2012. Brunton Theatre - Musselburgh (UK) 6th 7th Feb 2012. Athens Jewish Film Festival (USA) 11th Feb 2012. Stoke Your Fires (UK) 13th Feb 2012. - WINNER BEST DOCUMENTARY Shot, Edited Directed By Steven HattonFrom:electriceggukViews:0 0ratingsTime:01:26More inFilm Animation
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Heilig - A trailer for the new short film by Steven Hatton - Video