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Make Your Retirement Income Last as Long as You Do
When you think about retirement, wouldn’t you want your income to keep pace with your life? To maintain your lifestyle, enjoy vacations, and truly thrive in a retirement filled with security and purpose?
The question is—will you have enough assets to make that vision a reality?
The reality is sobering: 50% of Baby Boomers are extremely concerned about outliving their inc
Approach 1: 4% RULE
- Investments
- Finances & Economy
Rethinking the 4% Rule
Traditional retirement planning often relies on the so-called 4% rule. This guideline suggests withdrawing no more than 4% of your retirement assets in the first year and then adjusting slightly each year to keep pace with inflation.
While the 4% rule may work in some situations, it offers no guarantees—you could still run out of money. Additionally, assets in traditional accounts are exposed to market volatility, which can put your principal at risk.
In fact, a recent article titled “Say Goodbye to the 4% Rule” strongly challenges this approach, highlighting the limitations of relying solely on this traditional strategy.
In-Depth Insight
Strategy 1: The 4% Rule
Required Principal:
Using the traditional 4% rule, John would need $1,000,000 in retirement assets to generate his desired annual income of $40,000 ($1,000,000 × 4% = $40,000).
The Comparison:
While John’s money may remain more liquid and offer potential for market gains compared to a fixed indexed annuity, he still faces significant risks. He could outlive his income, and his portfolio is not protected from market losses.
Strategy 2: Fixed Indexed Annuity
Required Principal:
With this approach, John would need $570,000 in retirement assets—significantly less than the $1,000,000 required under the 4% rule—to generate $40,000 per year (assuming he waits five years before beginning withdrawals).
The Comparison:
A fixed indexed annuity protects principal from market losses while providing guaranteed retirement income for life. In this example, John could safely withdraw 7% annually.
While fixed indexed annuities may offer less liquidity than traditional accounts and have capped growth potential, the benefits of principal protection and predictable gains are compelling advantages in today’s uncertain retirement landscape.
Speak With a Licensed Advisor
You can also meet with one of our licensed professionals to get answers to your questions and see how these products could fit your unique situation. We call this a True Wealth Discovery meeting.
