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from an investment portfolio as of April 2021
Inflation (CPI-U) Adjusted Spending
(i.e. "the 4% Rule")
1.66%
Investment Strategy
Conservative
Moderate
Aggresive
2.39%
3.50%
Sustainable withdrawal rates
Notes: The conservative strategy uses a 25% stock allocation and seeks a 95% chance that real wealth will not fall below 20% of its initial level by year 35 of retirement. The moderate strategy uses a 50% stock allocation and seeks a 90% chance that real wealth will not fall below 15% of its initial level by year 30 of retirement. The aggressive strategy uses a 75% stock allocation and seeks an 80% chance that real wealth will not fall below 10% of its initial level by year 25 of retirement. Analysis assumes that withdrawals are made at the start of each year, retirees earn the underlying indexed market returns, and market return simulations are based on capital market assumptions starting from interest rate levels in April 2021. Market assumptions defined at www.retirementresearcher.com/dashboard.
Research shows that in today’s interest rate and market environment, you may only be able to withdraw 2.39%, adjusted for inflation, from a portfolio allocated 50% to stocks and 50% to bonds and have a high degree of confidence that your money will last over a 30-year retirement
One longstanding ‘rule‘ for generating income may no longer be viable
Source: Wade D Pfau, Ph D., CFA, RICP.
Years
Year 31:
The first year of retirement
60
50
40
30
The power of each year's return
20
10
0
0%
2%
4%
6%
8%
10%
12%
14%
Retirees are most vulnerable to sequence of return risk in the initial years of retirement.
Once distribution begins, the sequence is more critical.
During accumulation, the sequence of returns is less important.
Market performance can impact how long your savings last
Sustainable withdrawal rates are disproportionately explained by what happens in the early part of retirement. A market downturn early in retirement can have lasting effects.
How will the sequence of returns impact your retirement?
90
85
80
75
70
65
60
Lowest
Age
Source: Raj Chetty, Michael Stepner, Sarah Abraham, Shelby Lin, Benjamin Scuderi, Nicholas Turner, Augu
Income Percentile
Highest
88.3
81.2
86.4
75.6
Women
Men
Wealth and longevity
Research shows higher income Americans may need
to plan for longer lifespans in retirement.
Can wealth impact your longevity?
Insights:
Income Planning
2.39%
3.50%
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