So You’re Ready to Retire ...

You’ve finally made it. It is time to start dipping into your retirement savings to supplement your income.

Let me ask you some questions:

• From what account do you draw? In what amount?

• Within the account, what do you sell?

• More importantly, what is the amount you take? Are you confident you are not taking too much?

Remember, your savings has to last the rest of your life, and, if you are married, your spouse’s life. And don’t forget about inflation.

Two Solutions

1- The Bucket Approach

One solution to some of these challenges is the bucket approach. Here you have three buckets:

One bucket is for immediate needs and is invested in liquid funds, like cash.

The second bucket is for intermediate term needs and is invested in instruments with a 3-5 year time horizon.

The third is for long term needs and is invested with the expectation that the funds will not be needed for another 5-10+ years.

Here's another problem: It is 2008 and you’ve just retired. You are taking $10,000 each year from your portfolio. If you are getting a 10% return, this will last forever: $100,000 increases at 10% to $110,000, from which you take $10,000 and you’re back to your original $100,000.

But what if $100,000 drops to $50,000? Now when you take $10,000 out, you are left with $40,000. Then, what if the market stays flat for a couple of years:

$40,000 - $10,000 = $30,000
$30,000 - $10,000 = $20,000

Drawing $10,000 from a $20,000 portfolio is a lot different from drawing $10,000 from a $100,000 portfolio —see chart.

With the bucket approach, you have a bucket for immediate needs and it is invested in short-term instruments whose valuation does not vary a great deal. The stock portion of your portfolio is in the long term bucket. If it suffers a severe drop, you can leave it untouched and give it time to rebuild itself.

2- Fixed Annuities

Annuities have been around since the middle ages. Back then, you gave an amount to a church, and the church would pay you a monthly sum for the rest of your life. If you live a long time, you win. If you die prematurely, the church wins.

Today, annuities are provided commercially by life insurance companies. $100,000 at age 70 buys you approximately $10,000/year income, guaranteed by the insurance company. Annuities guarantee that you will always have that income. Some annuities even come with an inflation feature. Here, if you are in good health, and expect to live a long time, they are definitely something to consider. Rumor has it, “Annuitants live longer” — whether because of the reduced stress of knowing where their income is coming from or because they want to get the next check.

Do you know anyone in this situation? Why not have them contact us?


	Inflation Planner (assuming 3% inflation) You have no way of predicting how long you will live — another 25, 35 years? Longer? If you need $60,000/year to live on now, you can assume that you'll need: • $80,000 in 10 years; • $93,000 in 15 years; • $108,000 in 20 years. Two Solutions: 1- The Bucket Approach Bucket #1 is for immediate needs and is invested in liquid funds, like cash. Bucket #2 is for intermediate term needs and is invested in instruments with a 3-5 year time horizon. Bucket #3 is for long term needs and is invested with the expectation that the funds will not be needed for another 5-10+ years. 2- Fixed Annuities Remember Bob Anderson from Father Knows Best? His employer paid him and his wife a pension for the rest of his life. Annuities fulfill the same role. Fixed Annuities guarantee that you will always have income. Some annuities even come with an inflation feature. If you are in good health, and expect to live a long time, they are definitely something to consider. Annuities are an especially good solution for women, because women live longer than men. This is true whether they are married or single. When planning for couples, we have to consider a longer life expectancy for the wife. Fixed annuities may not be suitable for all. You should consult a licensed insurance agent regarding your financial objectives and unique situation to help determine if a fixed annuity is right for you. Please make sure you review all marketing materials, specimen contracts, buyer’s guides, and forms related to the annuity to ensure that it meets your short-term and long-term financial situation and liquidity needs. Withdrawals may be subject to income tax, and a 10% federal income tax penalty may apply to withdrawals before age 59 ½. Additionally, certain charges (referred to as surrender charges) may apply if you withdraw more than the penalty-free amount in a year. Under current law, tax deferral is a basic feature of tax-qualified plans. Placing qualified funds into an annuity does not provide any additional tax benefit. Fixed annuities guarantee a minimum interest rate on all or a percentage of each contribution over the life of your contract less any withdrawals and/or deductions and early surrender charges. All guarantees are subject to the claims-paying ability of the issuing insurance company. For your free personal retirement analysis, please call or email us today.

is the founder of DeVol Insurance & Financial Services. His focus is on retirement income planning. He enjoys listening to his clients’ ideas about their plans for retirement and helping them transform those ideas into an attainable plan for the future. His persistence and diligence is the key to his success —and that of his clients.

Tom has three children and lives with his wife, Connie, and their two younger children in Newton, Massachusetts. He enjoys gardening, tennis, biking, and opera. Tom is a member of the Newton Needham Chamber of Commerce.

Tom can be reached at 617-964-6404 or via email.

Securities offered through Sammons Securities Company,  Member FINRA/SIPC  Fee-based investment advisory services offered through Sigma Planning Corporation, a registered investment adviser.