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Investing Specialists

Can Your Portfolio Supply You With the Retirement Income You Need?

If you're looking to establish a sane, sustainable withdrawal plan, then follow these tips.

My recent articles featuring bucketed retirement portfolios--both traditional mutual fund and exchange-traded fund versions--sparked many insightful comments. The bucketing concept has resonated with many retirees and pre-retirees because it helps turn a portfolio geared toward accumulation into one that provides in-retirement income. It also enables a retiree or pre-retiree to back into a logical stock/bond/cash mix given his or her time horizon.

An essential first step before creating any retirement portfolio--bucketed or otherwise--is to determine whether that portfolio can deliver the income you need from it. Coming up with a safe withdrawal rate--the amount that you can withdraw from a portfolio per year without depleting it during your lifetime--is an essential part of the retirement planning process and has been the subject of much discussion among Morningstar.com readers. Retirement calculators can help you get your arms around whether your planned withdrawal rate is reasonable, but you can also run the numbers yourself, thereby employing the withdrawal rate method of your choice. Here are the key steps to take.