A Key to a Lasting Retirement Portfolio
by John Sweeney
If you’re retired—or nearing it—ensuring that your retirement investment portfolio lasts your lifetime is critical. And that’s not easy because by nature the stock market is volatile. What if a market downturn takes a bite out of your investment portfolio?
While you cannot completely control the market’s impact on your portfolio, there are things you can control that can also make a significant difference in how long your portfolio may last. One: your withdrawal rate from your portfolio. The amount you take can directly impact how long your assets could last in retirement.
But what about in difficult markets? At Fidelity, we still believe in inflation-adjusted withdrawal rates of no more than 4% to 5% a year for individuals who retire at age 65. That’s because we did the analysis using our Retirement Income Planner and an inflation-adjusted withdrawal rate of more than 5% steeply increased the risk of depleting retirement savings during an investor’s lifetime. We also ran some further analysis to determine the influence of different market environments.
[Editor’s note: Fidelity’s Retirement Income Planner is an educational tool developed and offered for use by Strategic Advisers Inc., a registered investment adviser and a Fidelity Investments company. The online tool can be accessed at http://personal.fidelity.com/planning/retirement/income_planner.shtml and is free, though non-Fidelity clients are asked to register.]
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