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Retirement Planning

Protecting your Portfolio for the Road Ahead

A thoughtful approach to stock market volatility is paramount when it comes to effectively managing a retirement portfolio. We implement the “5 & 4" rules for many retiree investors and those nearing retirement. The 5 & 4 rules are clear and effective retirement income strategies to help intelligently manage the investment portfolio over several decades.

4% Portfolio Withdrawal Rates

A 4% portfolio withdrawal rate provides an investor with $40,000 per year based on a $1,000,000 portfolio. Industry studies1 using historical data offer some support that 4% is a sustainable portfolio withdrawal rate – meaning that over many longer time periods, there is a high probability of maintaining your portfolio balance with a 4% withdrawal rate. This doesn’t account for inflation and only considers past results – future investment results are not guaranteed.

5 Years of Portfolio Withdrawals held within Fixed Income or Conservative Holdings

Our team designs the investment portfolio to (1) match your risk tolerance, and (2) build wealth or preserve capital to satisfy future retirement income needs. For most investors we use a “bucketing” strategy during the retirement distribution phase – when you’re taking account withdrawals.

  • Within the fixed income sleeve of the portfolio, we generally try and hold enough bonds to cover at least five years of projected account withdrawals. If you spend $50,000 from the portfolio each year, we want at least $250,000 in bonds. If stocks are in a bear market or under-valued, we prefer to sell from bonds to meet income needs – leaving your stock holdings invested, with the goal of selling at higher prices later.
  • For retirees taking a routine and scheduled account withdrawal each month, we periodically raise cash to cover between 6-18 months of future withdrawals. We generally hold funds in a conservative short-term bond fund.

Contact us to learn more.

Raymond James does not provide advice on tax or legal matters. Please discuss these matters with the appropriate professional.

[1] https://www.aaii.com/journal/article/insights-on-using-the-withdrawal-rule-from-its-creator