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Retirement My Way

SFP Retirement My Way Q+A, Life Expectancy?

Al and Debbie, in Montana, are worried about life expectancy and how it impacts their retirement plan?

How important is it to factor my life expectancy into my retirement plan?

  • Everyone’s situation is different, and their plan should be custom and unique to them.
  • Depending on your family genetics, you could plan for a longer or shorter life expectancy.
  • You could have a number of different strategies to address the impacts of a long life in retirement.
  • The fundamental principal is that the longer you live the more money you will need to last in retirement.

What are the different ways that my life expectancy could impact my plan?

  • People in retirement can face major challenges from longevity in a number of different areas.
  • The longer you live, the longer your money will have to last.
  • The longer you live, the more impacted you could be from inflation or the decreasing value of a dollar.
  • Also, you will have a greater likelihood of needing nursing home care which can be a huge cost.

What advice does Ryan have for people looking to protect themselves against running out of money in retirement?

  • Make sure that you work with a specialist that can guide you on the different strategies to address longevity risk.
  • There are certain investments and annuities that are designed to help protect against living too long, and all of the issues that could arise from it.
  • Make sure your plan is designed so that if you out live your projected life expectancy, you will still have adequate funds to support yourself in retirement
  • People are living longer and longer, so it would be advisable to overestimate your life expectancy.

On this edition of SFP question and answer, Ryan receives a question regarding life expectancy and how that fits into your retirement plan, from Elle and Debbie in Montana. Elle and Debbie write Ryan:  “we are in the process of creating a retirement plan, but we do not know how to plan for life expectancy. When calculating a retirement plan, how important is it to factor in Life expectancy?”

Ryan gets questions around life expectancy quite often from his clients, who are trying to prepare for retirement. This is a crucial aspect to a retirement plan. Your life expectancy is the foundation to which all the planning will take place.

Obviously the longer you live, the more money you will need to last throughout your retirement. This is why it is so critical for people who are getting ready to retire, to work with a retirement planer who specializes in retirement strategies that can take into consideration different life expectancies, and the different solutions that it takes to offset some of the potential issues that arrive with longer than projected life expectancy.

There are some tools that can pay a client a guaranteed income stream regardless of how long they live, similar to a pension payment or a Social Security payment. Although these are not Social Security or pensions they are similar in that the payment stream does not disappear or stop until the individual dies.

The other factor to consider when discussing life expectancy is that the longer someone lives the more susceptible they are to bearing the burdens of inflation. As Ryan says a dollar today does not buy what it used to, so the longer we live the more we will be impacted by the rise in inflation. That will directly impact our purchasing power and our standard of living.

Nursing home care might be the biggest issue that can arise with a longer life expectancy. The longer we’re alive the greater the chances that we will need to spend time in a nursing home or rehab facility. As we all know these can be extremely expensive cost for us to beer. When you take all of this into consideration you realize that it is of the upmost importance to create a plan that factors in all of these risks to a happy healthy retirement.

Long Term Care

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Wendi, in North Carolina, is worried about the cost of long-term care insurance?

How important is it to plan for a potential long term care event?

  • Everyone’s situation is different, and their plan should be custom and unique to them.
  • Depending on your family genetics, you could be more or less likely to need nursing home care.
  • You could have several different strategies and options to address long term care needs.
  • The fundamental principal is that there is a very real chance that you could need to enter a nursing home facility or have a nurse come to you, and that risk needs to be addressed.

Who will have to pay for long term care?

  • Many people believe that Medicare will pay for long term care expenses; They do not.
  • The government program that pays for nursing home care is Medicaid.
  • To qualify for Medicaid assistance, you need to meet a certain financial specific.
  • I most cases Medicaid will only be available to you after you have spent down most of your own assets.

What advice does Ryan have for people looking into long term care in retirement?

  • Some people opt for long term care insurance. This can be a great solution, but it can also be very expensive.
  • Others try to protect their assets from a potential nursing home claim, by working with an attorney.
  • Others attempt to self-insure, by putting money away to pay for the potential cost of the nursing home care.
  • And some people just cross their fingers and hope that they do not need the care.
  • Whatever you decide to do, you should speak with an expert and get professional guidance.

On this addition of SFPQ and day Wendy in North Carolina asks Ryan about his thoughts on long-term care insurance. Ryan explains that everyone situation is different and that their plans should be customized to fit their specific needs and goals. There is no way of telling if you will need or not need long-term care.

A good way to estimate or project if you will need long-term care, is to look at your family’s history and genetics. If both of your parents need a long-term care, then there is a good chance that you could need it as well. There are many different strategies and options for addressing a potential long-term care event. The most important thing to remember is that the chance of you needing long-term care whether that is in a nursing home facility or having a nurse come to you, is a very real risk and needs to be addressed in your retirement planning.

Many individuals believe that when they turn 65 in qualify for Medicare, that they will be covered for a long-term care or nursing home expense. In most cases that is not the reality of what will happen. Medicaid is a government program, that will pay for the long-term care expenses, if you were to need it. In order to qualify for Medicaid, there are certain financial guidelines that you must meet. Which basically means you must spend down most of your assets before Medicaid will step in and help pay for the long-term care expense.

So, because of this reality, people use different strategies to try to prepare for a long-term care expense without exhausting all their assets.

A common solution to this problem is the use of long-term care insurance. Long-term care insurance can be a very useful tool to offset the cost of the long-term care. However, it can be very expensive in terms of the cost of the premiums, and also difficult to qualify for the coverage in the event that you need long-term care.

Other people attempt to protect their assets by working with an elder care attorney to strategize on how best to protect their assets.

One solution which only works for a very small group of people, is to self-ensure. When you self-ensure you are basically putting money away that is earmarked for a future, potential long-term care expense. Most people do not have the funds or resources to do this.

And lastly, some people just cross their fingers and hope that they will not need long-term care.

Whatever you decide to do and whatever strategy you decide to pursue, you should speak with an expert who can give you professional guidance and how to navigate this very complicated landscape.

When to Retire?

Will, in Rhode Island, wants to know when she should retire?

How will you know when it is time to retire?

  • Everyone’s situation is different, and the decision on when to retire will be unique to them.
  • Just because you have enough money to retire does not always mean that you will want to retire.
  • Knowing when the time is right can be a very stressful situation.
  • Everyone has a different vision of retirement, and it should be approached on a case-by-case basis.

What will I do in retirement?

  • Some of the biggest concerns that people have heading into retirement is how they will pass their time and spend their days.
  • Many people will want to travel and stay active, others are looking to relax and take it easy.
  • Volunteering for a cause that you are passionate about is a great way to stay active and connected.
  • In most cases staying busy or passing the time is not a concern for our clients. They are more active in retirement than before.

What advice does Ryan have for people that are thinking about when it is time to retirement?

  • And most importantly you need to make sure that you have enough money to retire.
  • Then, think about what you enjoy doing, and who you enjoy doing them with.
  • Experiment with different hobbies and pass times to see what fits you best.
  • And remember that what fits you in your sixties, might not fit in your seventies, and eighties. There will be different phases of your retirement, and different activities that correspond to them.

On another edition of SFP question and answer, Jenn from Southborough asks Ryan when will he know that it is time to retire? Ryan informs Jen that everyone situation is different, and their decision to retire is based on several different factors.

The most important factor being, is does it feel right to them. First off you must have enough money to retire. If you do not have the funds to retire then you need to keep working.

Deciding whether to keep working can be very stressful for several different reasons. Many people fear that they do not have enough money and continue to work when they have plenty of money to retire comfortably. Another cause of stress for many people is how they will spend their time in retirement. Many individuals have worked 30, 40, and even 50 years to get where they are today.

Much of their identity is tied to their employment in Korea. They get extremely nervous about how they will spend their time when work is no longer in the picture.

What Ryan has seen over the years that works best for people, is to dive into something that you are passionate about. That could be a charity that you can connect with, and volunteer at. It could be a part-time job that you enjoy doing on your terms in on your time schedule. It could be a new activity or hobby that you really love to do and enjoy doing with people that are close to you and bring you happiness.

In most cases how to pass time during your days and retirement is not an issue. Most people find something that they love to do and get a lot of joy out of doing it.

A big thing to remember is that there are going to be many phases over the course of an individual retirement what someone does in their 60s is probably going to be different than the activities they enjoy their 70s, and those activities will most likely be different than what they are doing in their 80s.

So, it is important to keep in mind that activities hobbies change throughout the course of your retirement. An individual will be far more likely to travel in their late 60s and early 70s and they would be to travel in their 80s. So, it is important to keep in mind what you plan on doing and more importantly when you plan on doing it.

The Right Advisor

Jen, in Southborough Ma, wants to know if she is with the right advisor for her?

How will you know if you are with the right advisor?

  • Everyone’s situation is different, and the decision on when to retire will be unique to them.
  • Just because an advisor works for one person that does not mean that it will work for everyone.
  • Some people are better suited for going it alone and managing their own assets if they enjoy the idea of going at it alone.
  • Everyone has a different vision of retirement, and your advisor should share your beliefs and values around it.

How often should we be meeting?

  • Some advisors prefer to meet with their clients once a year, and that is adequate for many people.
  • Other advisors like to take more of a hands-on approach to retirement planning with their clients, in order to better address concerns and opportunities as they arise.
  • There is no right or wrong approach, it is solely up to the individual to see what approach fits best.
  • Another aspect to consider is if your risk comfort aligns with the advisor’s approach.

What advice does Ryan have for people that are trying to decide if they are with the right advisor?

  • Make sure that you connect well on a personal level before anything else.
  • Then, make sure that your comfort with risk and volatility aligns with the advisor’s philosophy on risk.
  • Ask to see worst case projections to see how you would fare under a market crash.
  • Also, make sure that how the get compensated is 100% transparent so that there is no confusion or frustration down the road.

On this edition of Summit financial partners question answer with Ryan Skinner, Ryan receives a question from listener Jen. Jen asked Ryan if she should consider looking for a new advisor and how do you know if you are with the right advisor?

She also mentions that although her returns have been good, most of her friends that manage their own money have also had good returns. So how does someone know if the advisor is responsible for the good returns or if it is just a result of a good market?

Ryan gives Jen some key points to think about when deciding which advisor is best for her. The first thing to consider is if you get along with your advisor on a personal basis. Connection is extremely important because this will be the person that is guiding you over the next phase of your life, Retirement. Ryan meets with his clients at least twice a year to review, not to mention all the social and educational events that SFP Holtz. So, if you are going to spend that much time with people that you need to make sure that you get along and enjoy each other ‘s company personally.

The second thing to consider is how often you want to meet your advisor. Some advisers only like to do check inns or reviews once a year. Ryan says that there is nothing wrong with that approach to retirement planning however he feels that it is not in the best interest of the client to do things that way. If your advisor does not meet you on a regular basis to discuss what is going on than it is more difficult to address potential problems or to capitalize on potential opportunities.

The last thing to consider is what is your advisers’ approach or philosophy on risk. It is extremely important to make sure that your risk tolerance or financial objectives coincide with that of your advisers. If your advisor has an aggressive approach to the markets and you are a play it safe type person that that will cause a lot of undue stress and anxiety for you. When your goals align with your advisers’ approach to the markets it can make for a much more enjoyable and peaceful relationship going forward.

Do I Need to Worry About Taxes in Retirement?

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Darren, in Naples Florida, asks if he needs to worry about taxes in retirement since he is single.

How are my taxes calculated in retirement?

  • Everyone’s situation is different, and their plan should be custom and unique to them.
  • Depending on your specific tax bracket, none, some, or 85% of your social security could be taxable.
  • The rate at which you are taxed can also depend on what you are distributing from your retirement plans.
  • Each person’s plan should be reviewed by an accountant or tax attorney.

Is all income the same in retirement?

  • No, some income or distributions will impact your tax rate and others will not.
  • Provisional income could have a significant impact on your retirement.
  • It is important to determine the best ways to take income or distributions in retirement before retiring, that way you have a plan to deal with taxes.

Does my social security get taxed?

  • Your social security could be subject to tax depending on your income.
  • There are ways to tax income from other assets in retirement that will not impact the taxation of your social security.
  • The more costly the activities, the more you are dependent on your nest egg to produce reliable income.

On this addition of retirement my way Q and day Ryan receives an email from one of his listeners in Naples Florida, Darren. Darren asks, do I need to worry about taxes in retirement since I am single and collecting Social Security?

This is a very common question and concern for a lot of Ryan’s clients as they enter retirement and are in early retirement years. Ryan explains that not all income is the same in retirement, and that depending on your specific situation you will be taxed at different rates.

Some people’s Social Security isn’t taxed at all, some people will have 50% of their social security subject to taxes, and some people will have 85% of their social security subject to taxes. Ryan stresses to his clients the importance of knowing what strategies to use and how those strategies will impact an individual’s taxes in retirement.

There are certain tools that you can use that will not impact or increase your taxes whatsoever. These tools are ideal for someone who is attempting to minimize or reduce their tax liability as they prepare for retirement. It is also extremely important to know and understand how provisional income plays into an individual‘s retirement planning process.

It can be very confusing and difficult to comprehend all the working parts of your tax situation in retirement. That is why Ryan always has his client’s plans reviewed by an accountant to make sure that they are as efficient as possible. An accountant is able to look at an individual’s Social Security, pensions, retirement savings plans, and any other savings vehicles that they may have, and determine what is the most beneficial way to take out or distribute this money in retirement. Most people’s goals are to pay as little in taxes as possible, so that they can enjoy their hard- earned money during their golden years.

Do I Need an Estate Plan?

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KELLY, IN MICHIGAN, ASKS IF SHE NEEDS AN ESTATE PLAN SINCE SHE IS NOT A MILLIONAIRE?

Do regular people need an estate plan?

  • Everyone’s situation is different, and their plan should be custom and unique to them.
  • Depending on your specific asset, and state laws you my need an estate plan to achieve specific goals while you are alive and after you die.
  • Estate planning is not exclusively done for the wealthy.
  • Each person’s plan should be done by an estate planning attorney.

 What will an estate plan do for me?

  • The right planning can give you control on how your assets are distributed once you die.
  • Estate planning is very common for individuals with special needs children.
  • People who die without estate plans can leave their children with a lot of hard work and frustration when they die.
  • A will is not a suitable substitute for a trust.

Can I lose my assets due to a nursing care expense?

  • You could potentially have to liquidate assets in order to pay for the nursing home expenses.
  • An estate plan will not exclude you from paying for a nursing home.
  • A proper estate plan should include a trust, will, health care proxy, and power of attorney.

In this edition of Summit Financials Partners, Retirement My Way question and answer, Kelley from Michigan, asks Ryan if it is necessary for her to have an estate plan since she isn’t a millionaire. Ryan explains that this is a very common question that he is asked by his clients and viewers of the show. Estate planning is not exclusively for millionaires or the super wealthy.

Everyone can benefit from an estate plan. Ryan urges all of his clients to sit down with an experienced estate planning attorney, in order to have a conversation regarding whether or not a full or partial estate plan would be beneficial to them achieving their goals. Ryan has worked closely with his longtime friend and estate planning attorney Gerry Griffin. Gerry has worked with a countless number of Ryan’s clients over the years to make sure that their plan is efficient and executed if they were to pass.

A proper estate plan should include a trust, a will, a power of attorney, and a healthcare proxy, as well as do not resuscitate instructions. It is very common for individuals with special needs children, to create an estate plan, to determine how their assets will be handled for the benefit of that child once they pass. An estate plan can make life much easier for the beneficiaries because it will be clearly lay out in documents, filed with the state, how that person intends for their assets to be distributed.  They can determine who gets what, how much they get, when they get it, and when they are excluded from getting it.

No retirement plan is complete without a thorough conversation about estate planning needs.

How much do I Need to Retire?

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EMILY FROM KANSAS SAW A COMMERCIAL THAT STATED THAT SHE NEEDED $1,00,000 IN ORDER TO RETIRE COMFORTABLY.

How much money do I need to retire comfortably?

  • Everyone’s situation is different, and their plan should be custom and unique to them.
  • Focusing on a specific dollar amount is not beneficial because retirement is really about income and not the size of the nest egg.
  • The amount of income that can be generated by the nest egg can differ greatly depending on how that nest egg is positioned.
  • Guaranteed income should be the focus to protect from a market downturn.

Does it matter what part of the country that I retire in?

  • Where you decide to live in retirement will greatly impact your standard of living.
  • New York City is going to have a much more expensive lifestyle than rural Kentucky and should be factored when planning for retirement.
  • Where you retire is not only about the cost of living but should also consider how you spend your days.

How much does my lifestyle factor into retirement?

  • Your hobbies and interests will greatly impact how your money should be positioned in retirement.
  • Golf and boating will be much more costly than bird watching and nature hikes.
  • The more costly the activities, the more you are dependent on your nest egg to produce reliable income.

What other factors should I consider with respect to my retirement?

  • Inflation can be devastating to someone’s retirement plan.
  • The cost of living is directly impacted by the inflation rate.
  • Tax rates are also a major part of retirement planning.
  • For every dollar that you pay in taxes, its one less dollar to spend on yourself.

One of Ryan’s listeners, Emily from Kansas, asks Ryan how much money is needed to retire comfortably.  Emily had recently watched a television commercial by one of the mainstream investment companies, and in it they stated that a person would need to have $1,000,000 saved for retirement to live comfortably. She wanted to know what Ryan’s opinion on this number was and if he was recommending that to his clients.

Ryan had a very different viewpoint on this line of thinking compared to that of the commercial the Emily watched.  In Ryan’s experience it is not productive to focus on a specific number.  He gives the example that $1,000,000 in Kansas would go a lot further than $1,000,000 in New York City. 

Instead of concentrating your energy into a specific dollar amount, Ryan advocates to focus on what you would need for expenses in retirement.  This line of thinking is the backbone to Ryan’s Retirement My Way process. 

This is where Ryan helps his clients figure out exactly what they need for basic expenses in retirement, like food, clothing and shelter.  The next part is calculating what they would need for the fun stuff, like travel, time with the grandkids, and golf.  Once there is a total number for expenses in retirement, he then looks at the income streams.

The priority is maximizing social security and getting the most out of it.  Looking at your life expectancy, and different filing options, Ryan and his team make a recommendation on how to file.  If you are lucky enough to have a pension, he’ll also look at ways to maximize that as well. 

Once, he has identified your “mailbox money” (social security and/or pensions), the next steps would be running an analysis of what your projected expenses will be versus what you have coming in.  The difference or shortfall is your retirement income gap.

Ryan will solve that income gap using your 401Ks, IRAs, 403Bs, TSAs and other retirement savings plans to create guaranteed monthly income that will solve for the income gap. These plans are protected from market loss and volatility. They are designed to keep pace with inflation, and last as long as you do.

Ryan stresses that it is not the size of the nest egg, but what you do with it.  His clients benefit from focusing on the retirement income, not the size of the account balance, especially when that balance is subject to stock market risk.  As you may have heard, here today gone tomorrow.  In Ryan’s opinion, retirement should focus on safe, steady, conservative returns. 

Can I protect my Nest Egg while Working?

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Sue and Mark from Chicago ask if they can protect their 401k’s while they are still working with their current employer.

Is it possible to protect my 401k from market risk while still working?

  • We want to avoid another 2008 like market crash.
  • Years ago, we could not move or protect our 401k’s while still working, but today we have options.
  • If we are over 59 ½ we can move the money from a 401k to an IRA in most cases.

What would another 2008 type crash look like to our retirement?

  • It could set us back years with respect to our retirement plans.
  • It could force us to really sacrifice in terms of our standard of living.
  • It is completely avoidable and unnecessary to have that much risk while going into retirement.

What would the process look like to protect our 401k while still working?

  • We would look at doing an in-service distribution through the 401k.
  • We would move a portion of the 401k assets into an IRA using a protection tool to safeguard against market risk.
  • We would still contribute to the 401k while working to get the benefits of a tax deducted contribution.

Sue and Mark from Chicago wrote to Ryan to ask him if it was possible to protect their 401k’s while they were still working at their company.  They were concerned that we were heading into another 2008 type crash and that their money was going to be lost in the market. 

In 2008 Mark and Sue were devastated by the loses that they incurred in the market.  They are now comfortable with what they have saved and are looking to protect what they have instead of growing it.  They wanted to know how, if possible, they could make sure that this did not happen. 

Ryan explained that there is a very common strategy that he uses with his clients to safeguard a portion of their 401k plan against market risk.  An in-service withdrawal allows the 401k plan participant to move a portion of their 401k assets into an IRA.  Once the funds are in the IRA a protection tool can be used to make sure that the individual’s assets are given protection from market risk. 

This is one of the many strategies that Ryan and SFP use to protect their client’s assets as they approach retirement.  If this strategy looks interesting to you or if you would like to learn more, you can reach directly to Ryan or any member of his team and they would be more than happy to send you out some information, or even set up a quick call with Ryan to see if this strategy or any other strategies would be a good fit for you.

Advisor Turnover

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BARRY FROM FLORIDA ASKS, WHY DOES IT SEEM LIKE EVERY COUPLE OF YEARS, HE IS ASSIGNED A NEW ADVISOR BY HIS INVESTMENT COMPANY?

Why do I keep getting assigned to a new advisor?

  • It is very common for people to get assigned a new advisor by their investment company.
  • By the time I get to know them, they are gone, and I must restart with another advisor.
  • These advisors are trying their best, but they lack the stability and consistency that is needed to be effective.
  • At the larger firms there is a lot of turnover when it comes to advisor and client relations.

Why is it important to have consistency with one advisor over retirement?

  • During the distribution years we need to create a plan and revise it at least annually.
  • You need to work with an advisor who has a thorough understanding of your unique situation and your goals in retirement.
  • There needs to be a plan in place to protect your assets during the volatile times in the market.

What are some of the benefits SFP clients get?

  • SFP clients meet with Ryan at least twice a year, and in most cases more than that.
  • Ryan works closely with an attorney and accountant to make sure that the plans are as strong as tax efficient as possible, as well as making sure that there’s
  • Ryan makes sure that he has an intimate knowledge of his client’s lifestyle so that he can build in an income plan to provide for hobbies and travel.

Barry from Florida writes Ryan to ask why he has had so many different advisors assigned to his account at his investment company.  He wants to know if it is common, and why Ryan’s clients at SFP do not have that same experience.  Ryan informs Barry that unfortunately it is not uncommon for people to get assigned multiple advisors over their time with a firm.  At the larger firms there is a lot of turnover when it comes to advisor and client relations. 

Ryan also goes on to explain that, at SFP, it is a completely different type of relationship.  Clients can live 30, and even up to 40 years in retirement, so the relationship is based on not only helping with finances, but sometimes more importantly friendship.  Ryan takes his clients through SFP’s Retirement My Way Process.  During this process Ryan gets to know everything about the client.  What do they need in retirement, like food, clothing, shelter, utilities, etc.  Basically, what they need to survive.  Then Ryan asks them what they want to thrive.  This relates to the fun stuff, like travel, golf time with the grand kids. 

By knowing exactly what I client needs and wants in retirement, he can then start to build out an income plan to provide them with guaranteed lifetime income.  Social Security and or pension is always the foundation to this income plan and getting the most out of these benefits is extremely important.  Then, Ryan will look at how to utilize remaining assets to provide guaranteed, predictable, lifetime income that is protected from market volatility.  This is how retirement can feel like a 30-year vacation.  By eliminating the fear, stress, and worry around a client’s money they can relax and enjoy themselves.  If this sounds interesting to you or if you would like to learn more, you can reach out directly to Ryan or any member of his team and they would be more than happy to send you out some information, or even set up a quick call with Ryan.

Market Risk during COVID-19?

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KELLY FROM SACRAMENTO ASKS RYAN SKINNER TO DISCUSS MARKET VOLATILITY DURING COVID-19 PANDEMIC.

Kelly from Sacramento writes the show to ask Ryan to discuss the impact of the COVID-19 pandemic and market volatility, on people’s retirement plans. Ryan explains that people who are approaching retirement or in early retirement need to be very aware of market risk and how it could derail their retirement nest eggs.

Ryan also discusses the 4% rule, and how does not always hold true to projecting out retirement income plans. The 4% rule states that, someone could distribute 4% of their overall portfolio during their retirement years and be confident that they would never run out of money. Back in 2001/2002 and in 2008 this rule didn’t hold true and many people had to put their retirements on hold. In addition to planning around market volatility, people should also be concerned with inflation risk as well. Inflation will decrease the purchasing power of the dollar over time and make goods and services more expensive, which will negatively impact an individual’s retirement.

Last , Ryan gives us a real live clients example of how a market crash during the distribution/retirement phase will devastate someone’s retirement nest egg to the point where they will most likely never recover.

How did COVID-19 impact some people’s retirement savings?

  • People who are close to retiring or in early retirement should not have a significant portion of their nest egg exposed to market risk!
  • In 2001, and 2002 when we saw a market crash it devastated people’s retirement savings and their plans.
  • The same thing happened back in 2008 when we had our last crash. People’s retirement nest eggs were devastated.
  • This is why it’s critical to protect your nest egg.

What is the 4% rule and how does it impact us?

  • It is common belief that someone can withdraw 4% of their total portfolio value throughout their retirement and not run out of money.
  • 2008 taught us that the 4% rule is not always 100% accurate.
  • When we experience a significant drop in the market it jeopardizes people’s retirement income

How do we protect against market crashes and protect our nest egg in the process?

  • We need to create a plan that not only protects against market risk, but also inflation.
  • We could experience up to 4 market crashes over a 30-year period in retirement.
  • Plans need to hold up against market volatility and inflation.

What would a market crash look like if I were distributing money for retirement?

Example: $500,000 (nest egg), taking $20,000/ year (annual distribution for retirement, (4%), -40% market crash

  • $500,000 (nest egg)
  • -$200,000 loss (40% market loss)
  • -$ 20,000(annual distribution)
  • $280,000 (nest egg balance)

In order to get $280,000 back to $500,000, we would need a 79% rate of return.

  • $280,000.00
  • X            1.79
  • $500,000.00

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