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Portfolios 310: How to Withdraw from Your Portfolio in Retirement

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1.
If you aren't satisfied with your withdrawal rate from your portfolio, what can you do?
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Accept a lower confidence level. You can also put off retirement or adjust your asset mix to possibly increase your withdrawal rate.
2.
To add up the value of your retirement portfolio so that you can determine how much to spend each year, you should include _______.
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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.
3.
In terms of portfolio withdrawal, what does a 50% confidence level mean?
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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.
4.
Many retirees have sources of income that are fixed, such as Social Security or pensions. How does inflation affect their purchasing power?
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It depends on the source. Many sources of fixed income lose their purchasing power due to inflation. But some of them get adjusted annually for the rate of inflation, thus keeping abreast of it.
5.
Your retirement time horizon will be how long your portfolio lasts before running out.
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False. Your retirement time horizon will be how long you expect to draw on your portfolio, not how long it actually lasts.
6.
What will likely happen to your spending rate during your retirement years?
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It will likely change. Spending needs change in retirement, especially for healthcare. And some spending will likely drop -- on clothes, for example.