Thinking About Retirement

Sep 06, 09 Thinking About Retirement
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The New York Times published a very interesting article about how people are approaching their retirement.  With the stock market eradicating large portions of many people’s stock portfolios and retirement savings, those nearing retirement are approaching their future with some trepidation.

However, some financial planners argue that it is possible to live a comfortable lifestyle and have enough savings to last.  If retirees and future retirees peg their annual retirement fund withdrawals to the price-earnings ratio and maintain a balance of 60% stocks to 40% bonds, they will be able to maintain variable withdrawal rates that will carry them through retirement.

Many people lost substantial portions of their 401k when the stock market crashed in late 2008.  The New York Times interviewed Michael E. Kitces, a financial planner that came up with the formula of pegging withdrawals to the price-earnings ratio.  While rates of withdrawal vary from year to year, retirees would be able to maintain a consistent lifestyle and insure that their money would last.  Even when things were dour, retirees only had to cut their yearly allowance by 10%.

Planning for retirement is essential.  Even if you are planning to supplement your Social Security benefits with your retirement savings, it is important to have enough money to allow you a comfortable living standard.  No one should work their entire lives only to short themselves during their golden years.  If you feel confident enough to manage your own retirement, then be a good steward of your future.  However, for most of us, we should try to find a reasonably priced financial planner that can help us plan for this important stage in our lives.  Pegging withdrawals to the price-earnings ratio is one way to approach retirement spending.  It is important that you have a plan that meets your specific financial needs.

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3 Comments

  1. Thanks for linking to the Times article. I just read it and I like the science behind it. 60-40 split seems like a mix most people can live with.
    .-= Steve´s last blog ..How and When to Use a Trailing Stop Order =-.

  2. Thanks. I also read your post on Stop Orders and a few other articles on your site. You guys have much useful info. I am doing a series of posts on learning how to invest and learning different strategies. I’d appreciate your input.

  3. I’ll be around, Londo. I like your site and your writing style. I tweeted this post this morning because I think it’s good information for a lot of people.
    .-= Steve´s last blog ..How and When to Use a Trailing Stop Order =-.

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