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Opinion: Tale of 2 Couples: Unlocking income for vibrant retirement

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Retirement should be full of freedom, fulfillment and the pursuit of long-awaited dreams. The work is done. The rest of life – you know, the part you have deeply anticipated – starts soon.

Maybe it is inviting family and friends along for vacation, enjoying a lake home or just finding some leisurely hobbies. Everyone expects to get more out of life when they retire.

In the financial realm, Social Security is a valuable safety net, but retirees often desire more. Few people want to scale back their lifestyle. The right strategy can give a retiree a vibrant future without compromise.

Consider this: An investment portfolio must support a retiree for 30 years or more.

The late 1960s and early 1970s were a challenging time to start a 30-year retirement. Why? High inflation created adversity. Plus, investment returns did little to help retirees.

Does this sound familiar? The last few years have been a reminder of how inflation and other headwinds impact retirees’ portfolios. Retirees must plan carefully.

Strategies for income
Let’s examine two hypothetical couples, Static Stan and Stacy and Dynamic Dan and Daisy.

Each uses a different strategy for retirement income. Both retire at age 65 with $1 million and will use this portfolio for income in retirement.

Taxes are always a factor, but we’ll assume the couples have identical tax situations, ignoring the impact of taxes in this example.

Static Stan and Stacy are cautious and have always been risk averse. They prefer the safe route so will opt for a stable method to generate retirement income.

They utilize a common rule of thumb, a conservative 4% withdrawal each year. No matter the movement of markets or their portfolio, they will happily withdraw $40,000 each year, or $3,333 a month, during retirement.

This is a conservative approach, so Stan and Stacy feel good. Unfortunately, they are probably leaving some cash on the table.

Dynamic Dan and Daisy are adaptable, taking advantage of extra opportunity if it means accepting a little risk. They always want to be strategic, so they choose a more nuanced approach.

They utilize a dynamic strategy that adjusts income in response to the movement in the market and their portfolio. It’s a rules-based system, considering multiple factors like portfolio performance and changes in life circumstances.

If their portfolio stays approximately between $800,000 and $1.2 million, then they can safely withdraw about $54,000 each year, or $4,500 a month.

During a downturn, they’ll reduce withdrawals. If the portfolio falls below $800,000, then Dan and Daisy will temporarily reduce their income by about $500 a month. This gives their portfolio time to recover.

When the portfolio grows, they can take extra income. If the portfolio rises above $1.2 million, then they can increase their income by about $500 a month.

For now, there is no need to dive into the math behind Dynamic Dan and Daisy’s plan. Clearly, this strategy is more aggressive than Static Stan and Stacy’s.

There is no guarantee, but the strategy provides a solid likelihood of success without sacrificing income. Since Dan and Daisy accept this additional risk, they can take home an extra $1,200 of income each month compared with their friends, Stan and Stacy.

Custom approach
The story serves as a reminder that there is no one-size-fits-all approach to withdrawls in retirement. It highlights the importance of flexibility. It is vital to explore options beyond conventional wisdom. Retirees should live life to the fullest, without compromising their dreams or financial security.

There are other questions to ask when considering retirement income:

  1. How long do you want to plan for? Nobody knows exactly how long to plan for, but a general idea can help.
  2. How will you invest your portfolio? Stocks, bonds and cash are the core components of most retirees’ portfolios. The mix of these asset classes can significantly impact your portfolio and, in turn, your lifestyle in retirement.
  3. Will you make changes? Retirement isn’t always a perfectly modeled formula. Being flexible is key. If a retiree is able and willing to adjust during a downturn, there is a solid likelihood of success without sacrifice.

Myles Jackson is a wealth management adviser at SignalPoint Asset Management LLC in Springfield. He can be reached at


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