How, especially if the market is going down or sideways while you are withdrawing funds to live on during retirement?
Good question - here's (my) the answer.
As part of my "preperation for retirement" (started when I reached my mid 50's), I laid out a plan of what I wanted in retirement (e.g. lifestyle), how much "net income" I wanted (no flimsy "80% of final pay" rule
), assumed long term tax and inflation forecast data.
Since I already had a stated budget (I'm sort of "anal" about where my $$$ get consumed), I felt confident in the numbers.
Over a period of about 3 years, I moved from a 90/10 portfolio to a 60/40 (shifted after I did extensive investigation on the bond/fixed income 40% portion, since this was "new territory" for me).
About 12-18 months before I had a "firm date" (age) that was my target, I started investigation of how I would handle the monthly "income requirements" within my investments, and more importantly what "tool" I would use. Since my/DW's retirement portfolios are both split between Vanguard and Fidelity, I looked at their methods for "monthly income". I decided on Fidelity's Income Management Account (IMA), primarily because it seemed more flexible and "fit the need".
At that time, I also started investigation of (oh no!) a possibility of an "annuity" (to replace what would have been a pension, if I still had one). After a long, drawn out process, I went with a SPIA (different thread on that process).
The next thing I needed to do was to establish a "cash bucket" (everybody knows what that is
) and my target was for 3-4 years. I slowly filled that "bucket with gains over an approximately 18 month period.
Medical expenditures also part of the equation. I pay (through my former employer) around $450/mo for both me and my DW (BTW, our increase over last year was $4 total $2 for each of us. Much better than the 7-10% I had budgeted for
).
It comes down to when you are wor*ing and accumulating your assets for retirement, your eye is on "the number". After you retire (and feel comfortable with the money management portion - took me a few months) your view on how to handle "times as this".
The easiest answer is that I sleep well. I guess that means that I'm confident with my plan (or I'm just crazy
). In addition, I'm not planning on taking SS till age 70 (9.5 years from now) nor is our home part of our "retirement assets". That's a bit of insurance. I could always claim SS in another 18 months, and of course at the same time take out a reverse mortgage, but those "options" are not part of our plan.
- Ron