The American Institute for Economic Research (AIER) has released a new study examining retirement draw-down strategies, moving beyond the standard 4% Rule to take into account the full range of financial risks and opportunities that retirees will likely face. The AIER analysis finds that no single rule works for everyone; that the early retirement years matter most in successful retirement finance; and that a flexible draw-down strategy leads to better retirement outcomes.
AIER’s analysis compares retirement draw-down strategies that fall into three broad categories: constant dollar (withdrawing a fixed amount of the portfolio annually), constant percentage (withdrawing a fixed percentage of the portfolio annually), and increasing percentage (adjusting the draw-down percentage upward throughout retirement). For each strategy, AIER applied initial draw-down amounts ranging from 2 percent to 7.5 percent. The Institute then examined the performance that would have resulted from actual market returns that occurred between 1928 and 2013. The goal was to determine which combination of drawdown strategy and initial withdrawal amount is best under a spectrum of investment conditions.
“Managing personal finances during retirement is one of the most challenging and confusing aspects of American life,” said Stephen Adams, President of AIER. “We undertook this study to provide objective advice on the question, ‘How much money can I spend during retirement?’ It’s important for retired people, as well as everyone who is saving for their retirement, to understand all of the variables that affect their lifestyle in retirement, from unforeseen expenses to below-average market returns. Our study shows that no one rule for withdrawals during retirement is right for everyone, and that simply reaching a dollar amount in assets before retirement isn’t necessarily the right way to approach saving either.”
Nearly half of retirees are over age 65. AudienceSCAN finds that 74% of these consumers are homeowners. This audience is more likely than average to vote in local, state or national elections and to donate money to a political party, candidate or campaign. Retirees are also more likely than average to say that, in the past year, they've started an online search as a result of a newspaper ad they've seen.
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