[quote=AN][quote=ltsdd]
No, your fixed income bucket should not be the largest bucket. But then again, there is no such thing as a one-size-fits-all solution. [/quote]Exactly. For me, it would be. Since I know I’ll be extremely risk adverse when I’m in retirement. I won’t retire until I can be extremely risk adverse with my investment.
[quote=ltsdd]Yes, I ignored it because I am not sure what you’re trying to show here. With $2.4M at retirement and you chose to w/d $100K/year? Why $100K? How long do you plan to have your nest egg last?
How much you should w/d a year should not only be determined by how much you have but also how long you plan to live off of that nest egg. If you’re worrying about depleting the nest egg too quickly then reduce your withdrawal or increase your nest egg. As for me, if I want that $2.4M to last 30 years then I would withdraw no more than $80K on my first year. During the subsequent years, how much I can take out will determined by how well my portfolio is doing. The withdrawal RATE is constant not the withdrawal AMOUNT. It’s called fluctuations.[/quote]
I pick $100k because the original debate is about comparing pension with $100k/year + COLA vs 401k. So I’m trying to remove as much variable as possible.[/quote]
If you’re that risk adverse and if you had $2.4M at the time you’re retired and want a guaranteed fixed amount of income for the next 30 years then it’s easier to buy an annuity. The problem is that these things are not adjusted for inflation, but I don’t think you’re concerned with that. I personally wouldn’t do it, but it may be a perfect vehicle for you. You can go here and play with the numbers:
Assuming a 1% annual growth rate and a withdrawal of $100K a year, your money will last about 27 years. If you bump the growth rate to 2% then you can expect to get a stream of income for 32 years. Now take that to 4% and you’ll probably croak before the money runs out (in about 65 years).
