Industry simulations coming out recently conclude that sustainable withdrawal rates when your money is invested in the market range from 2-4% depending on how your money is invested.
Why so low? 3 reasons –
- When the market loses and you compound that loss with your withdrawals, you have much less earning for you.
- When the market recovers and you withdraw the recovery, it doesn’t move the balance of your account back to your starting point.
- The money has to last your entire lifetime. Who knows how long that will be? You have to be conservative with your withdrawals if you want to help make sure the money will last.
How can you take higher withdrawal rates?
Incorporating insurance in addition to investments means you can take advantage of actuarial science, which offers more predictability as to how long the money needs to last. Whether you graduate from the planet before life expectancy or you live to be 100, actuarial science can change how much you can safely spend.
If you plan today – incorporating both investments and permanent insurance – you may be able to increase your withdrawal rates.