Living Off Your Savings: How to Turn Assets Into Retirement Income, Ep # 132

Before you retire you’ll need to think about how to turn your assets into retirement income. Today I’ll share with you my 2 favorite ways to turn your assets into retirement income. You’ll hear about the pros and cons of the 4% rule. I’ll also teach you about the guardrail strategy. After listening, you’ll be able to determine which strategy best fits your retirement goals. So listen in to gain more insight into how to live your best retirement.

Outline of This Episode

[1:22] You just have one lap to go, will you jog or will you sprint?
[5:30] The 4% rule
[10:10] Dynamic distribution strategy
[15:12] Come prepared to the webinar in April

You just have one lap to go, will you jog or will you sprint?

For most of you, at this time in your lives, you can see retirement right around the corner. You’ve put in 499 laps and you only have one to go. This is where you can make a conscious choice. You can take that last lap as a jog or you can take it as a sprint. No one will look down on you for jogging it. Especially during these trying times, but think about the legacy you’ll leave behind if you choose to take it as a sprint. This is a great opportunity to show those around you just what hard work looks like.

The 4% rule

The 4% rule was created by William Bengen. The premise of the 4% rule is that you can take 4% out of your portfolio every year for 30 years and not run out of money. This rule works in good markets, bad markets, and everything in between. It also takes into account inflation adjustments. It should be noted that this is a very conservative strategy that generally leaves you with as much or more in your portfolio than you started with. Listen in to hear the negative side of the 4% rule.

The dynamic distribution strategy aka the guardrail strategy

The basics of a dynamic distribution strategy call to set a withdrawal rate based on rules. You can increase or decrease your spending based on the amount in your portfolio. You can spend more when the market is up and reduce your income when the market goes down.

The pros of this strategy are that you can spend more or give to charities and beneficiaries while you are living. Another benefit is that this strategy mirrors human behavior. When the markets are down we tend to want to do something about it.

While you can spend more during the good times it can be hard to then reduce your income during difficult times especially if you don’t have room in your retirement budget. Listen in to hear how a dynamic distribution strategy really works.

Which strategy will you use for your retirement income?

Think about the different levels of flexibility between these two strategies and consider which option fits your goals. Tune in next week for the final episode in the Living Off Your Savings series to hear about taxes in retirement. Remember to hang in there, these markets won’t last forever.