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Rekenthaler Report

The Retirement Income Puzzle

When outperforming your portfolio's withdrawal rate isn't enough.

What Goes Up ...
Last Friday’s column addressed changing market conditions. Because bond yields have indisputably fallen, and expected stock returns disputably so, the percentage of assets that retirees can safely withdraw from their portfolios has gradually declined. The article compared 2013’s circumstances with today’s, illustrating how traditional withdrawal rates have been endangered by higher asset prices.

Along the way, the article inadvertently surfaced a curiosity. In one of the spreadsheet exercises, the sample portfolio increased in worth during the first 20 years of retirement, as its internal growth outweighed the amount of its withdrawals. After two decades, though, the portfolio began to erode, sending it into a long descent that would ultimately deplete its assets.