Episode 19: What is the Correct Withdrawal Rate for My Retirement?

08/21/20 • 23 min

In today's show, I'm going to be answering a question that far too many retirees don't know the answer to and that question is, "What is the correct withdrawal rate for my retirement?
The question regarding withdrawal rates and retirement dates back decades. Since traditional retirement plans were brought about in the 1970s people have wanted to know how much money they could withdraw from the retirement and have it last until they passed away. In the mid 1990s, it was assumed that based on life expectancy and current returns in the market, a retiree could take around 7% per year and still be okay. But there was an individually started questioning this logic. He was a native in New York who was born in 1947. He got a Bachelor of Science degree in aeronautics and astronautics from MIT. He worked for 17 years with his family owned soft-drink-bottling franchise firm in the new New York metropolitan area. The company sold in 1987, which is when he decided to become a financial advisor. His name is William Bengen. William started using what is called the Monte Carlo method to help determine the probable outcome of people's retirement plans based upon certain withdrawal rates during the mid 1990s....

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Previous Episode

Episode 18: Is Social Security Going Broke?

Is Social Security really going broke? The short answer is yes. Before you go tell all of your friends I told you, so. I recommend you stick around because although Social Security is going broke, it will never be broke.
Possible solutions that can be taken to make Social Security is financially sustainable for the foreseeable future.

1- Raise the amount of taxes employees and employers are contributing into the program

2- Move full retirement age from between age 66 and 67 to age 70

3- Make all W2 earnings subject to the Social Security tax

4- Change the program into a welfare program

5- Decrease the delayed retirement credits

6- Delay eligibility from 62 to 64

7- Reduce the family benefits

8- Reduce annual COLA increases
I don't know which of the changes I've talked about today, the government will choose to implement to solve the financial issues Social Security will have in the future, but they will choose one of them or a combination of them not because they want to, but because they have to in order to stabilize the program.
Hopefully now you have a better understanding of my comment from the start of the show where I said, "Social Security is going broke, but it would never be broke". It's my belief that Social security will continue to be a critical part of a well planned out retirement and that we can count on it to be there for decades to come.

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Next Episode

Episode 20: Five Takeaways from the Power of Zero Paradigm

I'll share with you five takeaways from the power of zero paradigm. This paradigm is based upon the belief that taxes will be higher in the future and the best way we can insulate ourselves against the time of higher taxes is to do appropriate planning now, so we can eliminate tax rate risk in the future. I will provide you with a warning though, and that is that the first few takeaways are going to seem a little depressing. But if you'll stay around until the end of the show, I promise you that you will end up with some great news at the end.

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