Investors today need to examine very carefully the best way to tap into their retirement nest eggs. Safeguarding adequate income and removing the risk of funding shortfalls is very important. This is difficult to achieve as forecasting the exact cost associated with living is not possible with 100% accuracy and future retirement asset account values will fluctuate in line with economic & market conditions.
The primary focus of a prudent income withdrawal approach is to maintain a viable balance between managing lifestyle expenses and long life expectancy risk with a view to avoiding the uncertainty of running out of money.
We found that the best way is to consider a dynamic approach to taking income from retirement savings. Periodically, adjusting withdrawal rates and asset allocations in response to changes in wealth, age, lifetime income and health offer greater chance of retirement income funding success. It is important to have a Withdrawal Policy Statement (WPS) in place where pre-agreed actions in terms of asset performance, income withdrawal level and its increases/decreases are applied with discipline.
This guide communicates the specific risks associated with drawing income from a retirement portfolio and how to make sure the money lasts a lifetime.
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