Ms. P explained to them how they should apply the 4% withdrawal rule to finance the rest of their lives. But it’s trickier than they imagined. She showed them some charts that were outputs of Monte Carlo testing on their portfolio. Under lots of scenarios, they discovered, their money won’t last for 30 years. Not only that, toward the end of their golden years, their portfolio may take a sickening plunge towards zero—even if it makes it to 30 years with some assets left. How could this be? After all, they are millionaires!
There are two culprits. The first is inflation. Their portfolio may get eaten away by annual, tiny-looking increases in their withdrawals that Ms. P says they need to make to keep up with inflation. Those increases are like termites bringing down a building. The second culprit is the withdrawals themselves. By liquidating assets from their portfolio to create income each year, they have fewer assets remaining after each withdrawal. The only way the withdrawal scheme can work is if the value of the remaining assets expands enough to cover the amount sold.
Source: Seeking Alpha
Related Articles:
- 9 High-Yield Managed Distribution Policy Funds
- The Elite Dividend Stocks List
- Dividend Stocks Poised To Beat Inflation
- Is It Time To Sell Long-Bonds?
- Stocks That Pay Monthly Dividends
________________________________________________________________
Subscribe to:
Post Comments (Atom)
~
Popular Posts Last 30 Days
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
Dividends and diversification -- those two things can help you achieve a comfortable retirement when combined with the income you will recei...
-
The best dividend stocks have one thing in common: resiliency. They can continue increasing their dividends even in the harshest economic en...
-
Investors wanting to enjoy steady and consistent income should consider dividend aristocrats. In fact, even in these chaotic times, dividend...
-
A good dividend stock has more than a high yield. Dividends need to be supported by cash flow, and cash flow depends on the long-term streng...
-
It's hard to beat a sustainable, high-yield dividend paired with a beaten-down valuation. The best dividend stocks offer high yields and...
-
Higher dividend yields often imply that the underlying company paying the dividend has a higher risk profile. However, that's not always...
-
When hunting for discounted investments, one excellent starting point is to look for businesses with dividend yields trading above their fiv...
-
Strange but true: seniors fear death less than running out of money in retirement. And unfortunately, even retirees who have built a nest eg...
-
BDCs can be excellent investment options for those seeking high returns, particularly when acquired at favorable valuations and supported by...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.