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 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.  Recent financial conditions have clarified the risks, 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 to 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 essentially guaranteed income for a predetermined number of years.  The Income Ladder replaces salary while the remainder of the portfolio is invested in stocks for growth.  In time stocks are sold to Extend the Income Ladder, but Defined Withdrawals is not simply a Buy and Hold strategy for stocks.  It is a Buy and Hold Out strategy.  There is a big difference.  A key benefit of the strategy is the ability to hold out for favorable stock selling opportunities.  We call this Navigating.

The Defined Withdrawals strategy itself is not complicated, but real-life income plans and personal financial situations can be.  People frequently have changing income requirements over time and need to factor in other non-investment sources of income.  Inflation needs to be considered at all stages of the planning process, and determining the proper allocation of income-generating and growth investments for a given person’s financial situation is not trivial.  It requires a powerful tool.  That tool is the Retirement Income Navigator software.

Retirement Income Navigator™ Version 3.0

For a detailed understanding of this unique software, download our free book, Mastering the Journey with the Retirement Income Navigator.  But this is much more than a software manual.  It describes in detail the Defined Withdrawals strategy and many important topics associated with retirement income planning and management.  Learn about different investment income strategies, dollar-price erosion, income ladders, trend-line analysis, etc.

Finally, even with a solid plan, investing for steady and dependable income takes some practice, and no one should try it for the first time with real money and real consequences.  Instead try our Practice Navigator calculator to see if you can maintain your desired income for up to 30 years.  This free calculator simulates real-life stock market variability, but unlike other Monte Carlo programs, Practice Navigator lets you make annual decisions and adjustments to better simulate the real-life experience of managing investments for income.