Retirement Income Planning [Make Your Savings Last]

Make sure you never run out of money after you retire

One of the questions we’re asked the most is how to create a safe after-retirement income plan. And no wonder. Today, 9 out of 10 people approaching retirement are concerned about making their savings last. That’s why we’ve put our expertise to work on personalized planning everyone near retirement or already retired can afford, and use to make confident decisions.

What’s wrong with the 4% rule?

Many people believe they can make their retirement savings last by only withdrawing 4% of the value each year. Here are the facts.*

See our applicable disclaimer here.

Average success rate using the 4% rule

GuidedChoice Retirement Income Planning 50%

Average success rate using GuidedChoice*

GuidedChoice Retirement Income Planning 90%

Source: Asset Valuations and Safe Portfolio Withdrawal Rates by David Blanchett, Michael Finke and Wade D. Pfau.

*Given the current market environment with bond yields below 2% and the CAPE ratio so far above 30, a 4% initial withdrawal rate has less than a 50% probability of success over a 30-year period with a 40% equity portfolio. This success rate is much lower than past studies, which have typically noted a probability of success above 80%, generally closer to 90%.

The 4% rule is rigid. It is like a one-size fits all shoe: for some it fits, but for many it requires a shoehorn. Using it can be uncomfortable and awkward, and you might find it does not fit your lifestyle. The 4% rule (or any standard withdrawal rule) is generic and is built on static assumptions that do not change over the years you are planning to withdraw assets from your retirement accounts. These assumptions don’t take into consideration key factors that change and can impact your retirement income plan and withdrawal plan. Specifically, the 4% rule does not allow for the variability in how most retirees actually spend. For example, retirees typically travel early in retirement, and less so as they age. Other spending habits change as well. According to [a study by] J. P. Morgan Asset Management, except for charitable giving and health care, most aspects of retirement spending actually decline over time. [J.P. Morgan Asset Management Guide to Retirement 2017, p. 20] With GuidedChoice, we have tailored our retirement income planning service to your needs and goals and to take into account multiple factors that change over time. You can plan for world trips or other significant expenditures in our tool, and solve for spending with those expenses taken into account. By understanding these factors along with your personal information, our tool applies our methodology to recommend a sustainable spending plan. Our advice is most useful when we can update it each year for how your situation and savings have changed. When we advise you on spending each year, we also project the likelihood of your money lasting throughout your entire retirement if you implement our advice. Of course, there can be no guarantee that this will be the case. Our stated average success rate of 90% using GuidedChoice compared to a 50% average success rate using the 4% rule reflects our estimation of the probability that your retirement assets will last beyond your lifetime. In order to create our recommended spending plans, we run thousands of Monte Carlo simulations of different spending levels and at different levels of portfolio risk. Any recommendation we make is estimated to have a 90% probability of success at the time it is made based on the information provided to us. Changes in circumstances can impact the estimated success rate, so we encourage you to update your information at least annually.

Receive a financial strategy and plan unique to you

Designed by Nobel Laureate Dr. Harry Markowitz, the creator of Modern Portfolio Theory and our proven risk/reward model, our digital intelligence runs thousands of market simulations — including some of the best and worst financial scenarios — to create a retirement income, drawdown and investment strategy tailored to your individual goals. Nothing is left out, or left to chance.

You’ll know:

Exactly how much you can safely spend each year
How to withdraw money from your investments in the most tax-efficient way based on the information we have
When to take Social Security
How to adjust your investments to support your annual income strategy
Whether purchasing an annuity makes sense for you

For an inside look at how we deliver these answers and more, take a short tour of how our Retirement Income Planning works.

Easily test different scenarios throughout the year

Another advantage you’ll enjoy is scenario planning. At any time, you can easily see how different factors will affect your financial outlook. From extra vacations and family bequests to unexpected health costs, you’ll know in advance how any change will impact your income strategy, so you can make the smartest personal choice.

If you or your spouse haven’t retired yet, we can also guide you towards determining the ideal retirement age based on your finances, and show you potential spending levels at different retirement ages.

Additional safeguards to keep you protected from risk

While our proven methodology calculates the precise balance of risk and reward for your portfolio, we also examine tax laws, withdrawal rules and more to determine the most consistent level of annual income for you. That way, you won’t experience a shortfall that could leave you without the funds you need in a given year. Our simulations even add 10 years onto life expectancy for extra security.

Another way we protect you is by asking you to renew at the start of each year. It’s a reminder to provide us with any financial or life goal changes that may affect your income or investment strategy. Together with any tax law changes, we’ll use that information to update your withdrawal and spending plan for the coming year to keep your plan fully personalized, and able to ensure your money lasts for the long term.

Personal help whenever you need us

Along with our online advice and tools, our expert team is always ready to provide assistance. Contact us to get prompt answers to your questions, advise us of any changes to your circumstances, explore new financial or life goals and more. When you join us, we’ll also arrange an initial consultation to help you start with confidence. Learn more about our personal client support here.