Many people assume that managing money for income is simply a matter of selling investments as needed from a diversified portfolio.  But there are hidden dangers in this strategy (or lack of strategy) that are not immediately obvious.  When an investor is forced to sell investments for income during a down market, he or she can quickly devastate a portfolio to the point where it is no longer possible to recover---even after the market does.

With the popularity of Monte Carlo software programs,  the risks are becoming clear, and financial advisors are recommending lower and lower withdrawal rates to compensate.  But a Systematic Withdrawals approach is not the only option.

Defined Withdrawals is a simple but powerful strategy that reduces risk, provides greater peace-of-mind for both clients and advisors, and often supports higher investment income.  The foundation of the strategy is an Income Ladder of fixed-rate investments designed to provide certain income for a predetermined number of years.  The Income Ladder replaces salary while the remainder of the portfolio is invested in stocks for growth.  Eventually stocks are sold to extend the Income Ladder.  But if the market suddenly crashes, the investor can take comfort in knowing that near-term income is secure while waiting for a more favorable selling opportunity.

If you're skeptical of anyone claiming to have a better investment strategy (and you should be!), try our free Practice Navigator™ tool.  With a little practice you will beat the Systematic Withdrawals benchmark every time.