The Financial Survival Guide to Retirement Week 2 Retirement Strategies - Advanced

Review - Decision Rules Decision rules allow for a possible higher level of living in retirement Higher initial income level over not using rules Comparable final income level to not using rules Greater total withdrawals over retirement BUT – person must be willing and able to cut back, if needed

Terminology Success rate – percentage of simulations that end with a positive portfolio Confidence level – results for which the simulations exceed a specified value. For example, for a legacy at a 95% confidence level of $100,000 means that 95% of the simulations resulted in a legacy of $100,000. Constant dollars – the dollar amount is expressed in terms of today’s dollars. Future dollar amounts are reduced by inflation. Median – half the simulation results were greater and half the results were less than the median value. PV (present value) – future dollar amounts discounted by inflation to today’s values. Standard deviation – a statistical measure of how much things fluctuate. The greater the number, the greater the range.

Assumptions – or use your own data We’ll start with the basic $1M retirement portfolio $1M in retirement assets Invested 60% in stocks, 40% in bonds Assume person is 65, will live to 99 Rates of return Russell 3000 index for total market Federal Reserve Board data for 10-year Treasuries Withdrawal strategy is 4% Rule

Retirement Quant Enter data Financial projections What-ifs Retirement ages Legacy Market returns Failure analysis

Failure Analysis What are the early warning signs of future potential failure? Withdrawal rates > 6% in early years Declining portfolio