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 Systematic Withdrawals 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.

With the popularity of Monte Carlo software programs,  the risks associated with Systematic Withdrawals are becoming clear, and financial advisors are recommending lower and lower withdrawal rates to compensate.  But Systematic Withdrawals 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 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.  In time stocks are sold to Extend the Income Ladder, but if the market crashes, an investor can take comfort knowing that near-term income is secure while waiting for a more favorable stock selling opportunity.

The Defined Withdrawals strategy itself is not complicated, but real-life income plans and personal financial situations can be.  People frequently have variable income requirements and other non-investment sources of income.  Inflation needs to be factored in at all stages of the planning process, and determining the proper balance 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.

New Version 3.0 Now Available!

For a detailed understanding of the software capabilities, download our free book, Mastering the Journey with the Retirement Income Navigator  But this book is much more than a software manual.  It describes in detail the Defined Withdrawals strategy and many other important topics associated with retirement income planning and management.

Still not convinced?  Try our free Practice Navigator calculator.  After a little practice you will beat the Systematic Withdrawals benchmark every time!