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June 26, 2021

How reliable is your retirement income?

By Gordon Powers, Sympatico / MSN Finance

Just about everyone who’s looking to retire has the same objective: to have enough income to live on for the rest of their lives. You may have saved for many years and invested your money carefully. But when the money has to flow in the reverse direction, suddenly you’re faced with a whole new set of challenges.

It’s all a series of tradeoffs, says Paul Merriman, author of Live It Up Without Outliving Your Money. Unless you have more money than you think you'll ever possibly need, you have to make some difficult decisions, the outcome of which will depend largely on future developments beyond your control.

The major fork in the road is whether to choose a fixed or a flexible withdrawal plan, he believes.

Some folks are so focused on getting a paycheque that they set up their retirement income stream in the form of an immediate annuity, even though that means worrying endlessly about just when to lock in an interest rate, giving up control of their assets, taking on increased inflation risk, and leaving little or nothing to heirs.

Others simply spend the rest of their lives worrying about where to invest and subsequently how much to withdraw, generally opting for a set percentage of their money each year. They often make little adjustment for inflation though, relying instead on portfolio growth to keep them ahead of increases in the cost of living – which hasn’t worked out that well recently. 

Before you jump in, look to the past for guidance, says Merriman, who provides an extremely detailed set of ‘what-if’s’ in this article.  If you’re nearing retirement or know someone who is, have a closer look.



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...