Goal-Based Investing

Best Investments for Retirement Income for Suitable Situations

The first step of meeting your goals is determining what exactly they are via a retirement strategy. You will need to know how much income you need during retirement and how much your portfolio will need to provide.

Start with an estimate of how much you would like to spend. Sometimes this is lower after retirement since mortgages are paid and kids are financially independent, although this isn’t always the case.

Every day is Saturday now and the increased spending is certainly possible. When in doubt estimating 100% of your current needs is a good starting point for your retirement plan. If your actual expenses are lower in retirement, it’s always easier to adjust down.

Next, you can subtract all the income your portfolio will not need to provide. Examples include your Social Security Benefits, any pensions or other income sources such as real estate. Once you know how much you need from your portfolio, you can get a rough estimate of how large a balance you need by dividing by 4%. This is because 4% is a commonly accepted “sustainable distribution rate” for those with a balanced portfolio retiring at a normal retirement age. Don’t see this as a dogmatic rule. You’ll adjust over time and will need to recalibrate your strategy if retiring in an unusually good or bad year.

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