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

2. 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

3. 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.

4. 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

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

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