Most people have never heard of the term ‘spend down income planning’. It is usually only associated with applying for government benefits. It’s the planning that 95% of financial professionals use. Unfortunately, most financial professionals don’t explain the theories behind spend down planning. Spend down planning is when you withdraw a certain percentage from your retirement plan to use as retirement income for the rest of your life and hoping that you never run out of money.
Retirement income planning when using a proper mix between bonds and stocks or mutual funds Was established by William Bengen as a standard rule on how to spend down your retirement. William Benjamin published a study called determining withdrawal rates using historical data. Bengen’s theory was that you could withdraw 4% from your retirement account every single year for the rest of your life and have a reasonable chance of not outliving the money. A reasonable chance is not a solid retirement income plan.
When retirement planning with most financial advisor’s, they will illustrate it off of hypothetical historical data. These illustrations Can create many uncertainties in a retirement plan. The reason for this is most financial advisors use risk based accounts for their retirement planning. Most of them will never illustrate a 30 to 40% loss in your retirement plan. Have you ever seen a 30 to 40% loss in the market? Of course you have. Could that actually happen? Of course it could. This situation alone can cause you to run out of money in your retirement years.
When most people begin to do their retirement planning, they want to know, if they have enough income to retire. When doing retirement income planning, You want to be able to provide enough income from the retirement accounts to be able to live the rest of your life. Retirement income planning should be done with guaranteed outcomes that will have pay outs that provide guaranteed income for life.
Most commonly asked questions:
- How do I retire?
- When can I retire?
- How much money do I need to retire?
- How much will I spend in retirement?
- When should I take Social Security?
- How do I apply for Social Security benefits?
- How much will I pay in taxes in retirement?
- Should I take my pension as an annuity or a lump sum?
- How will I afford medical expenses in retirement?
- How should my money be invested once I retire?