Preserve Your Income
Manny, the magnitude of the stock-market crash was a wake-up call for some retirees, particularly those who don't have traditional pensions or other forms of guaranteed income.
MANNY'S VIEW: Stay Faithful to StocksYour Retirement Action PlanRepair. Rebuild. Retire.
A commonly accepted rule of thumb suggests that if you restrict your withdrawals to 4% of your investment portfolio during your first year of retirement and increase your withdrawals in subsequent years to keep pace with inflation, you should have enough money to last a lifetime under most circumstances. But the market meltdown was no ordinary event, and some retirees now have to scale back their withdrawals or risk outliving their savings. Some financial advisers are rethinking how current and soon-to-be retirees should invest their money. Instead of "return on investment," the acronym ROI now stands for "reliability of income."
In fact, I'm intrigued by an "income for life" model that divides a retiree's assets into separate “buckets.” The first bucket holds about 25% of the assets, invested conservatively in a ladder of certificates of deposit or short-term, immediate-payout annuities to generate income for the first five years. Another 50% or so of assets might be invested in bonds and a broad-based stock-market index for intermediate goals. The remaining 25% is invested more aggressively in stocks, commodities and real estate for long-term goals of 15 years and beyond. That allows retirees to benefit from potentially higher returns without having to depend on the market for immediate income needs. At the end of each five-year interval, some assets are used to replenish the income bucket, and the remaining investments are reallocated for the long haul.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
My advice to retirees: Create a secure income plan to cover your costs.
Manny Schiffres says stay faithful to stocks.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Here's How To Get Organized And Work For Yourself
Whether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
By Laura Petrecca Published
-
How to Manage Risk With Diversification
"Don't put all your eggs in one basket" means different things to different investors. Here's how to manage your risk with portfolio diversification.
By Charles Lewis Sizemore, CFA Published
-
457 Plan Contribution Limits for 2025
Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025 than in 2024.
By Kathryn Pomroy Last updated
-
What Does Medicare Not Cover? Seven Things You Should Know
Healthy Living on a Budget Medicare Part A and Part B leave gaps in your healthcare coverage. But Medicare Advantage has problems, too.
By Donna LeValley Last updated
-
13 Smart Estate Planning Moves
retirement Follow this estate planning checklist for you (and your heirs) to hold on to more of your hard-earned money.
By Janet Kidd Stewart Last updated
-
Medicare Basics: 11 Things You Need to Know
Medicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
By Catherine Siskos Last updated
-
The Seven Worst Assets to Leave Your Kids or Grandkids
inheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
By David Rodeck Last updated
-
SEP IRA Contribution Limits for 2024 and 2025
SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 in 2024 and $70,000 in 2025..
By Jackie Stewart Last updated
-
Roth IRA Contribution Limits for 2024 and 2025
Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
By Jackie Stewart Last updated
-
SIMPLE IRA Contribution Limits for 2024 and 2025
simple IRA The SIMPLE IRA contribution limit increased by $500 for 2025. Workers at small businesses can contribute up to $16,500 or $20,000 if 50 or over and $21,750 if 60-63.
By Jackie Stewart Last updated