Plan for a long retirement, inflation, market volatility, and withdraw the right amount from savings to help reduce the chances of running out of money.Prepare for life's eventual curveballs with an income plan that combines income from multiple sources to create a diversified income stream in retirement.
This means there's a real possibility that you may need 30 or more years of retirement income. Without some thoughtful planning, you could easily outlive your savings and have to rely solely on Social Security for your income. And with the average Social Security benefit being just over $1,369 a month, it likely won't cover all your needs.While inflation has been low in recent years, it can have a powerful impact over the course of 20 or 30 years.
The sample target investment mixes below show illustrative blends of stocks, bonds, and short-term investments with different levels of risk and growth potential. With retirement likely to span 30 years or so, you'll want to find a balance between risk and growth potential.Source: Strategic Advisers and Morningstar/Ibbotson Associates. Hypothetical value of assets held in untaxed portfolios invested in US stocks, bonds, or short-term investments.
The sequence of good and bad market performance years may also have a major effect on your portfolio's ability to sustain your income. For example, a portfolio that starts out strong in retirement and has losses later will likely be in much better shape than one that has down years early, even if strong performance in later years brings its average return back in line with historical averages.
There are a few things to keep in mind, though. You may give up access to the savings you use to purchase an immediate or deferred income, so you'll need to have other money available for unexpected expenses. If you purchased these annuities, you also forgo any growth potential for this money; however, you can pay extra for annual increases in payments to help offset inflation. In addition, you can select to provide protection for your beneficiaries if that is important to you.
Creating and managing an investment portfolio in retirement requires some effort along with the discipline to stay on plan even during volatile markets. You need to carefully research investment options and choose ones that match your goals. You also need to monitor your investments and portfolio, and rebalance when needed. And it's important to manage taxes on your investments too.