| Steady
and Dependable Investment Income
is the
|
| New Challenge for Many
Investors
|
People
often assume that managing money for income is simply a matter of
selling investments as needed from a diversified portfolio and
then periodically rebalancing assets to maintain a target allocation.
But
there are hidden dangers in this strategy
(or lack of strategy) that are not obvious. An investor, who
is forced
to sell investments for income during a down market, can
quickly devastate a portfolio to the point where it is
no longer possible to recover---even
after the market does. This common approach is called Systematic
Withdrawals, and it is usually accompanied by a statistical
technique called Monte Carlo Analysis. The Monte
Carlo Analysis is used to
determine a safe withdrawal rate---recognizing
that the definition of "safe" usually still assumes a 5-10%
chance of running out of money too soon. Systematically
selling investments as needed for income is the easy, automatic,
and seemingly natural approach, but it's not really a
strategy. It's just the default situation that exists when
one does not have a deliberate income withdrawal strategy.
As we head into the second phase of
the "401(k) Experiment", today's
retirees and the many baby boomers on the verge of retirement need
a highly strategic way to maintain steady and
dependable income while investing in financial markets that can be
anything but steady and dependable. It's not easy. In
fact it can be a white-knuckle-ride for even the most
experienced professional pension fund managers.
And now as pensions disappear, individuals and their advisors are having to
take on this responsibility.
The
solution is Defined Withdrawals.
Defined Withdrawals is a simple but powerful income withdrawal
strategy that reduces
risk and provides greater peace-of-mind. The foundation is an Income
Ladder of fixed-rate investments that provides dependable income for a predetermined number of years. The
income ladder replaces salary and offers the security of a steady
paycheck while the remainder of the portfolio is
invested in stocks for long-term growth and inflation protection. Eventually some stocks are sold to Extend the Income
Ladder. But if the market is down, the income ladder allows the investor to sit tight and wait out the
storm. Plan benchmarks and stock trend-lines are
used to help determine when to sell stocks.
Download our free book, Mastering
the Journey with the Retirement Income Navigator, for a
more complete explanation.
How
much difference can strategy make? Find out with our free Practice
Navigator calculator. This unique calculator simulates
real-life market variability and lets you practice managing a Defined Withdrawals
plan while comparing your results to a Systematic
Withdrawals plan. The calculator is a simulation
tool that can be played like a game. See how much
income you can reliably withdraw without running
out. It may take a little practice, but after you
get the hang of it, you will find that a Defined
Withdrawals plan consistently outperforms a Systematic Withdrawals plan. We recommend viewing the free Nightmare
on Wall Street presentation before using Practice
Navigator since this presentation teaches some important
navigational tricks.
The Defined Withdrawals strategy itself is not complicated,
but real-life income plans and personal financial situations can
be. A powerful tool is needed to develop and optimize a
comprehensive Defined Withdrawals plan. That tool is the Retirement
Income Navigator software, which we offer in cooperation with
Brentmark Software, a leading provider of financial planning
tools. Click the Products link at the top of the page
to learn more.
We
are often asked whether the Retirement Income Navigator software
is designed exclusively for professional planners or whether it is
also suitable for individual planners. It is a professional
product, but many individuals will have no trouble following the
examples in our Free Book
and using the
software to develop their own plans. Of course we still
always recommend seeking professional assistance before
making final decisions---from
an advisor who specializes in developing Defined
Withdrawals plans!
| About ISG, Inc. |
| For
over 15 years, ISG, Inc. has been focused specifically on the
topic of managing investments for steady, dependable,
and long-term income. Long before the current financial crisis and the tech
stock bubble, we developed a common-sense strategy for optimizing investment
income that has now proven the test of time. Our products
include the unique Retirement Income Navigator
planning software and the Managing Money During Retirement with
Defined Withdrawals professional seminar. We also offer many free resources to both professional
and individual planners. We do not sell investments. |
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