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Well it's one of the greatest fears facing retirees.
Out living your nest egg and new data is suggesting a tried and true metric for managing your withdrawal slightly behind dry.
Ric -- CEO of settlement financial services joining me now.
-- got great to have you back on the show so big questions tonight about this 4% -- and for those who don't know.
This is the withdrawal rate from your savings your investments that is suggested for people who are already in their retirement years so.
Once you're out of -- -- work life that first year you take out 4% the next huge -- for plus inflation.
We tell your clients.
We tell them that what the obvious that the more you take out the greater the risk you're going to run out of money so we'd like the 4% number we get really nervous when the number gets higher.
When he gets higher of course right now lot of people are saying it's -- -- lower much lower for example T.
Rowe Price says.
That -- decent withdrawal rate would probably be much lower because if you take out 4% and you started way back in 2000.
With a portfolio of 55% stocks 45% bonds your chances of making it through thirty years is just 29%.
They say this 4% roll back fires and of course we saw a lot of this when the market sold off.
After the great correction after the -- start of the Great Recession.
Do you think they've got it right.
No I think that their analysis leaves a lot to be desired.
They took an artificially.
Terrible period of time the two thousands.
They didn't assume that the individual would make lifestyle changes reducing their need for income.
And there assuming that you're never going to touch principle which is of course the most bizarre assumption of all.
Not all of us have children and not all of us who -- have children insist on leaving our full -- -- to them as an inheritance.
Well I guess build it's all of that upgrade -- withdraw but also how much money you have Morningstar is saying.
The folks should lower their withdrawal rate to two point 8% to make there.
Funds the last thirty years so -- here's somebody else in the marketplace saying that 4% rule it's just too aggressive the people need to dial back certainly what we've seen in the last few years -- -- stock market.
If you go back to -- 20082009.
It was punk what people got really hurt now -- starting to see the experts say well you need to reduce your withdrawal rate.
Well I I think that it's based on an artificial period of time -- artificial portfolio of an allocation to stocks vs bonds.
And I don't think that history really demonstrates that it's going to work out exactly that way the fundamental premise -- be careful how much money -- throwing make sure you don't run out.
That's prudent but to artificially scare people into saying pay a 4% withdrawal rate is.
In necessarily dangerous I think that's a little too inflammatory.
Alternatives -- you give your kept the customers when you're talking about this other places to invest other.
Other ways of taking money out -- or thinking about their retirement cash.
What's really key question Jerry and it's a lot more than just stocks or bonds there are sixteen major asset classes and markets sectors and we wanna oh I'll get our clients across that broad spectrum on a global basis not just stocks and bonds -- government securities oil and gas gold and precious metals commodities foreign securities when you build a truly diversified portfolio in that manner.
You can provide a much greater likelihood that you will have the assets to sustain your entire life extension.
I understand what you're saying and I appreciate that you know it's interesting this 4% will to -- it seems sort of silly because it seems to apply the same medicine to absolutely everybody or their times.
When people shouldn't be taking 4% out.
No question about it and I can give you other cases where the client has to take eight per -- Not the we will want them to -- due to their circumstances they have no choice but to do that so all you can do is manage the individual case of the client.
Giving them a place that is designed for their best interest in their circumstances -- general rule of thumb.
All right well I agree with that Rick thanks for coming on tonight appreciate your time.
All right well --