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.
Posted by: Jack | Jun 26, 2021 8:09:07 PM
Oh, I have given up caring anymore. I have achieved the highest education anyone can possibly achieve. I though I was doing everything right to live a good (but not excessive) life. All that is now gone. Now I could fret over it and destroy my health or I could accept it. I`m not too proud to line up at the soup kitchen. Heck, I keep hearing about all these scumbag execs destroying copanies and getting any with ungodly amounts of money and all these bail outs. I`m sure someone could drop a few pennies my way. Do they still make penniesÉ Damn my $&*$*$&?$&?$&?$&%$&?%$?%$ keyboard is stuck on French again. I am pissed off!!!!!!
Posted by: James | Jun 27, 2021 11:15:26 AM
By the time I understand this article I'll be dead already!
Posted by: Time to start a revolution | Jun 27, 2021 12:07:09 PM
Just another person trying to justify his job. I too thought I did every thing right, but now who cares? Now the government can take care of me, I have paid enough taxes, interest rates etc, in my life.
Posted by: sheila | Jun 27, 2021 10:33:36 PM
Well I do agree on one thing the goverment will also have to take care of me because it don't matter how much money you put in the bank if you take a little out the goverment wants their share first then at the end of the year you took to much they want more of your taxes don't matter if you had paid 52% while you were at work it seems its never enough for them so I will spend what I have before I hit the rip age for pen****
Posted by: nottobrite | Jun 28, 2021 11:21:32 AM
Hey the food isn't all that bad in the soup lines . And you can always get a frigerater box to live in at Leon's, no payments ever. Hell if you know the right people , you can even get a free sleeping bag. so now you know this information it sould take the pressure off your dessison to retire or work till you die .
Posted by: nancy | Jun 28, 2021 7:23:55 PM
Great article and charts. I would add that the aftertax return ought to also be a factor to consider. For example, dividends and capital gains are taxed at a lower rate than interest income. In Ontario an individual can earn up to $40,000 in one year in dividend income without paying any income tax! If at least part of the income is in a lower tax bracket, you can withdraw less, as your taxes are lower.
Its clear from your charts that while government guaranteed bonds feel safest, over the long term a balanced approach is safest option, part bonds, part equity, to offset inflation.
Inflation in my opinion is inevitable at some point with all the new government debt accumulated globally during this nasty recession.
I luckily bought more stock close to the recent bottom of the market, but I'm planning to sell some in time to load up the bond side of my portfolio with long term bonds when the rates soar way up. Remember bonds going at up to 15 to 18 percent interest rates, even long term ones at 12 or 13 percent? If bonds go way up again, the share dividends will be worth less, and the share prices will plunge again. If you lock in long term bonds that you can trade, and the rates go down, you can sell some at a profit, then load up on stocks again when they are a bargain. So you might be even more successful if you are a bit flexible on the mix, and keep adjusting it. Just a thought!
Posted by: Ken | Jun 29, 2021 7:44:52 PM
i had to fight for it. The other problem is in the economic losses of trillions. If the world looses 40 trillion dollars and their net income is one trillion dollars per year, it wouldn't take a genius to figure the world is broke and the governments don't want the people to figure it out. Wait till next November when the usual stock market down turns. I will bet my last rrsp dollar it won't be worth the same as it is now.