Deep Blue Publications Group LLC: How Retirement Funds Could Turn On You
One of the biggest dilemmas people face today is what financial experts like to call the "variation of outcomes". In a more practical sense, it would mean the difference between those students who were on the top 10 during your high school, for example: 5 made it into Ivy League schools, 3 got into other universities, one went to work and the other took a break. In short, even in a supposed set of people, you can never predict what will happen in the future.
And when it comes to retirement investments, people tend to have similar strategies on withdrawal that consequently points to various outcomes. Case in point: how investors could have survived the peak of the 90s bull market which was viewed as one of the worst times to start withdrawing.
For example, you had 1 million USD invested by the end of 1999 and then decided to withdraw a fix rate of 5% (50,000 USD) every year. Five percent turns out to be a sustainable enough withdrawal rate, even with the inflation taken into account according to Deep Blue Publications Group LLC planners. (Note: There really is no recommended sustainable percentage of withdrawals as brokers themselves admit they get antsy when clients begin to take more than 6% annually.)
Naturally, the outcome will be widely different depending on one's timing and specific investment. Then what's the lesson learned from that period of 2 consecutive bear markets?
* Do not withdraw from stock funds during a bear market for this will significantly increase your losses. Besides, once the fund rebounded, your withdrawals will decrease in value.
* Most popular funds of the month are not always recommended. They could have been overpriced and overstuffed which is perhaps why it had a supposed 'good' performance during previous quarters.
* Don't bet all your shares during retirement especially if you retire at the start of a multi-year bear market.
It does make a great difference if your investments are not that closely related with stocks as a safeguard for any unexpected outcome. The usual choice in making a diverse portfolio today is bonds but this could also mean you'll get hit once the interest rates increase. Consider foreign bonds instead, or get into real estate and gold, all of which are not that related with stocks.
In the end, the amount you withdraw at a given year is still based on a number of factors such as life expectancy, existing loans and lifestyle. Just make sure you avoid a wide "variation of outcomes" from your investments.