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From lowering your stock exposure to increasing your withdrawal rate, Morningstar’s personal finance guru, Christine Benz, describes thepositive impact higher yields are having on retirement planning.
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SAFE RETIREMENT WITHDRAWAL STRATEGIES
Christine Benz shares Morningstar’s latest assessment of safe withdrawal rates for retirement portfolios and different strategies to extend retirement income.
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CHRISTINE BENZ
- Director of Personal Finance and Retirement Planning, Morningstar
ACTION POINT
CONSIDER ADDING A FIXED IMMEDIATE ANNUITY TO YOUR RETIREMENT PLAN
- UPSIDES:
- Pays a set amount of income per month for life
- Offers highest payments in years, often more than treasury bond yields
- Unlike bonds, they don’t mature, fluctuate in price, or have to be managed
- The insurance company assumes the risk that you will get more income than put in
- DOWNSIDES:
- Must pay a lump sum to the insurance company
- Onerous penalties to liquidate
- Might die before income exceeds investment
- TO MINIMIZE INVESTMENT LOSS RISK:
- It is best to buy when healthy & just starting retirement to have time to collect
- Can add cash refund rider stipulating unspent capital be passed on to beneficiaries if the annuitant dies before a specific date
- Essential component: Invest with an established & highly-rated insurance company
BOOKSHELF
ONE INVESTMENT
BENZ: DEFINED MATURITY INCOME STREAM
BUY: – iShares iBonds Term TIPS ETFs
- Holds portfolio of TIPS- US Treasury Inflation Protected bonds
- Bonds mature in a specific year.
- Available in different maturities
- Can buy in increments, building a bond ladder in easily tradable ETFs
FROM THE ARCHIVE
Christine Benz from the WEALTHTRACK Archives:
WEB EXTRA
HOW TO RETIRE PROJECT
Why has Morningstar’s longtime Director of Personal Finance and Retirement Planning decided to write a book on how to retire? She shares her motivation.
