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.
To find out how long you will be using your retirement portfolio, you need to ______.
Subtract your expected retirement age from your life expectancy. This is the simplest way to do it.
4.
Which statement is true?
Your spending rates in retirement will likely change over time. Your spending rates may rise or fall. That's why you'll need to monitor and adjust your spending amounts throughout your retirement.
5.
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.
6.
Once you have multiplied your withdrawal rate factor by your total investable assets for retirement, the resulting number will be _______.
The amount you can spend your first year in retirement. Though the resulting number may look like the amount you can spend each year, you must remember to factor in inflation. Therefore, the number applies only to your first year. Thereafter, you would increase that withdrawal rate by the rate of inflation over the prior year.
