Nov 25, 2014 Spending that Nest Egg Wisely in Retirement
It’s difficult enough to plan and save right for retirement, given today’s topsy-turvy financial markets. What’s more, it can be a bit of a puzzle in those Golden Years to come up with the right withdrawal plan. The idea, of course, is to find that balance between spending down a portfolio while maintaining the right asset allocation to capture future growth possibilities.
One method that investors often use for spending during retirement is the ‘bucket strategy.’ According to an overview in the American Association of Individual Investors (AAII), more than thirty-percent of financial professionals recommend this approach to their clients:
The ‘bucket strategy’ segments retirement assets by certain categories; generally based on the risk level of the assets and the needs or expenses these assets are expected to cover over the period of time in retirement when the assets are expected to generate income. With the help of a qualified financial advisor, the bucket approach can help bring that all-important sense of control to the investor’s concerns about having enough income during their lifetime.
A financial advisor can also help an investor assess their individual risk tolerance in handling the financial strains put on the portfolio during the market’s dips. Using a questionnaire that asks basic questions about risk preference, an advisor can determine an appropriate allocation given a client’s time horizon and other sources of income, such as pensions and social security.
Ultimately, no one strategy fits all investors. Consulting with a qualified advisor can help you develop a withdrawal plan that will keep you on your best path forward.
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Market Update: February 2023