Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
Many retirees have sources of income that are fixed, such as Social Security or pensions. How does inflation affect their purchasing power?
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.
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.
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.
5.
Once you have multiplied your withdrawal rate factor by your total investable assets for retirement, let's say you come up with $35,000. This will be the amount you can spend each year of your retirement.
False. Given that you must adjust for inflation each year, the $35,000 would be good for your first year only.
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.