Living happily in retirement means crafting a spending plan to support your lifestyle. To do that, you’ll need to think about how you plan to live in retirement. Not just now, but for the long term too. That could involve a plan to spend more early in your retirement.
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Category: Withdrawal Strategies
One withdrawal strategy that you could use for your retirement income is to withdraw a fixed percentage of your portfolio each year. Because of its simplicity this approach may be appealing to you. It is also very easy to implement.
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What are the risks of relying on dividends for retirement income? Like most things used in moderation there isn’t anything wrong with dividends, or the stocks that pay them. In fact, higher-dividend paying stocks are usually older, established, and strong companies. They can be good components of retirement income plans and help provide some diversification in investment portfolios.
The risk comes in their application, and the popular strategy of loading up on dividend paying stocks exposes retirees to more risk than they usually realize.
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One of the key considerations in a retirement income plan is the amount of money that you will withdraw from an investment portfolio. Your decision regarding how much income to take from your retirement account necessitates that you strike a balance between current consumption and future account value.
In simple language, this means that you are deciding how much income to take now, and weighing the risk of withdrawing too much and running out of money, or withdrawing too little and leaving more than you anticipated to heirs. The last part may not seem as bad, and it arguably isn’t, but it depends on which end of the income spectrum you are on and how much you value your own consumption.
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