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!