Choose wisely. There is only one correct answer to each question.
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1.
In terms of portfolio withdrawal, what does a 50% confidence level mean?
There's a 50% chance that your portfolio will expire before you do. For some, a 95% or 100% confidence level is crucial: You want your withdrawal rate to survive most worst-case scenarios. Others may accept a lower probability of success.
2.
How do most retirees cover their expenses?
With a combination of their investments and fixed sources of income. The more fixed sources of income you have, the lower your withdrawal rate can be.
3.
If you aren't satisfied with your withdrawal rate from your portfolio, what can you do?
Accept a lower confidence level. You can also put off retirement or adjust your asset mix to possibly increase your withdrawal rate.
4.
What do changing healthcare costs, vacation costs, and other expenses mean for your portfolio's withdrawal rate after you retire?
You will likely need to adjust it. Some expenses will drop, while others will rise. While one cannot say with certainty, this is the probable outcome.
5.
To add up the value of your retirement portfolio so that you can determine how much to spend each year, you should include _______.
All taxable and tax-deferred accounts. You should ideally include all from both types, since this is when you will be using up your money.
6.
Your retirement time horizon will be how long your portfolio lasts before running out.
False. Your retirement time horizon will be how long you expect to draw on your portfolio, not how long it actually lasts.
