Today, fewer retirees are covered by traditional pension plans, which places a big burden on retirees to fund their retirement with income from personal savings and investments. Only one in four Baby Boomers expect significant income from an employer provided pension.[i] When it comes to generating income from your savings and investments, there are several challenges. And, if you’re not prepared, they have the potential to derail your whole retirement income plan.
One such challenge is underestimating the number of years your retirement will last. You may live longer than you expect. Retirement could last 30 years or more. For a couple both age 65, there is a 25% chance that one spouse will live to age 97.[ii] That makes it a real challenge for many retirees to determine how much income they can safely withdraw from their savings and investments without running out of money before they die.
Another challenge is determining what today’s “safe” withdraw rate is. Generating reliable income in retirement can be more challenging when interest rates are low (like they are today in 2018). You may not be able to count on traditional approaches to generating retirement income, such as the “4% Rule” in today’s environment of low interest rates and a volatile stock market.
Are you or your clients comfortable rolling the dice when it comes to retirement income?