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A lot of discussion and historical research have been done to ascertain a Safe Withdrawal Rate. Many experts even recommend that retirees should keep their nest egg in a balanced portfolio of stocks and bonds, and withdraw around 4% pa. This rate is called the swr. I beg to differ. I argue that retirees should have two streams of income: insured stream and uninsured stream.
The insured stream consists of a few annuities. The combined annuity income provided should cover the survival needs. The reason why a few annuities is chosen over just one is to reduce the insurer risk and the currency risk. For example, the few annuities may be bought from a AAA US insurer paying in US$, a AA British insurer paying in Euro, and a Swiss insurer paying in Franc. If a retiree can expect to derive US$3,000 assuming a 4% pa withdrawal rate from his nest egg, but needs just US$1,000 to survive, then he should buy a few annuities that pays at least US$1,000 + cushion of 10-20% =US$1,200/m.
The rest can then be left in an uninsured stream consisting of a balanced portfolio, from which he withdraws at a swr.
What do you think?
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