There is a flawed assumption that 4% portfolio distributions are sustainable throughout retirement. Unfortunately, this has proven to be unreliable for too many retirees. The problem doesn’t lie in the math of a withdrawal rate but with the structure of the portfolio.
Retirement portfolios are often assigned a 60/40 allocation (60% stocks with 40% bonds and cash) with monthly distributions drawn proportionately across all assets, regardless of market direction.
In down markets, this strategy forces the sale of more shares to generate cash. The worrisome decision now facing the retiree is whether to increase the pressure on the portfolio by taking the same distributions or to decrease income. Neither is desirable.
Integras Partners takes a healthier approach to retirement income planning.
We layer our clients’ portfolios with designed strategies matching the timeframes of withdrawals.
By isolating more stable assets for short-term spending, we insulate early distributions from random market performance. Assets we don’t need until later have appropriate time to capture growth.
Our clients comfortably spend during market declines without being forced to choose between taking less income or the fear of possibly running out of money.
