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Ensuring Lifestyle

Once your essential expenses are covered, it’s time to consider how to structure your remaining assets to support the lifestyle you want to have in retirement while helping you to be prepared for unexpected expenses and market movements. ​

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Determine what lifestyle your portfolio can reasonably support and achieve​

The goal is to have a portfolio that’s able to respond in different market environments. In our view, there are three principles of a sound retirement portfolio:​

  • Downside risk management​
  • Income generation
  • Growth and income protection
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Think carefully about how much you withdraw from your retirement savings

Will you have enough money?

If you begin by withdrawing 4% of your savings during your first year of retirement and adjust subsequent withdrawals, the chance of it lasting 30 years is improved.1
Think carefully about a sustainable withdrawal rate

We recommend considering to start with a 4% initial withdrawal adjusted for inflation and dynamically fine-tuned, either up or down based on various factors. Work with your financial advisor to ensure your plan takes these factors into consideration.

Factors that can reduce withdrawal rate

  • Market volatility
  • Inflation
  • Life expectancy
  • Long-term care
  • Healthcare
  • Higher taxes

Factors that can increase withdrawal rate

  • Risk tolerance
  • Adaptive spending
  • Guaranteed income sources
  • Interest rates
  • Lower taxes
 Adjust for inflation Total asset value Probability of Income lasting Estimated withdrawal rate Increased withdrawals Reduced withdrawals
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Apply the principles of a sound retirement portfolio to your lifestyle investments

Lifestyle is about achieving the life you've earned.

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Downside risk protection

The danger that your portfolio will decline in value, particularly early in retirement, due to market fluctuations is one of the main dangers facing investors in retirement. Your advisor will recommend strategies and solutions that can help mitigate the impact of market volatility.

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Downside risk protection

The danger that your portfolio will decline in value, particularly early in retirement, due to market fluctuations is one of the main dangers facing investors in retirement. Your advisor will recommend strategies and solutions that can help mitigate the impact of market volatility.

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Income generation

In retirement the focus naturally shifts to creating a retirement income that will last a lifetime. One step in this process is to begin transitioning your portfolio to income producing assets. However, your portfolio should not become "income exclusive" but rather "income leaning."

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Income generation

In retirement the focus naturally shifts to creating a retirement income that will last a lifetime. One step in this process is to begin transitioning your portfolio to income producing assets. However, your portfolio should not become "income exclusive" but rather "income leaning."

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Growth & inflation protection

If you need $5,000 a month to live now, you will need $10,000 a month in just over 20 years to support the same standard of living. Longer life expectancies and inflation mean retirees need a portion of their portfolio in assets that grow over time and hedge against inflation.

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Growth & inflation protection

If you need $5,000 a month to live now, you will need $10,000 a month in just over 20 years to support the same standard of living. Longer life expectancies and inflation mean retirees need a portion of their portfolio in assets that grow over time and hedge against inflation.

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Balance is the key to retirement success

Building a portfolio that offers downside protection, income generation, capital growth and inflation protection requires careful analysis of each investment in the portfolio and making smart tradeoffs.

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Balance is the key to retirement success

Building a portfolio that offers downside protection, income generation, capital growth and inflation protection requires careful analysis of each investment in the portfolio and making smart tradeoffs.

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Choose your asset allocation in retirement

Asset allocation is about finding the appropriate mix of risk and return potential for you. We recommend considering a diversified portfolio incorporating the principles of a sound retirement portfolio when selecting investments. This process may require greater investment choice than typically available in 401(k) plans and/or target date funds.4

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Asset Allocation document Image asset-allocation-document-image No top spacing 5cef321f-a921-42b8-a942-1dc6837b2c9b ImageCompound /binaries/content/gallery/ampmicrosites/retirement-income-guide-redesign/other/asset-allocation-pies.svg /binaries/content/gallery/ampmicrosites/retirement-income-guide-redesign/other/asset-allocation-pies.svg/asset-allocation-pies.svg/brxp%3Asmall Five investment portfolios increase in potential risk and return from conservative to aggressive. Allocations across four investment categories are: Conservative, Moderately Conservative, Moderate, Moderate Aggressive, and Aggressive. false 8c292811-ecd7-4976-b986-3c743bbe3cda
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1 A Monte Carlo simulation refers to a mathematical analysis meant to imitate reality in order to determine the likelihood of a particular result or set of results. This is produced by projecting a situation many times using varying inputs and then measuring the number of simulations resulting in particular outcomes. For this Monte Carlo simulation we ran 1000 trials, each simulating portfolios over thirty years by varying the risk and return assumptions relative to the IRG’s Capital Market Assumptions for a Retired investor with a Moderate risk profile. The “Probability of Income Lasting” represents the proportion of the simulations that ended with the portfolio not running out of money

2 Inflation: U.S. Department of Labor – U.S. Consumer Price Index for All Urban Consumers: All Items, Percent Change, Not Seasonally Adjusted.

3 Probability of not running out of money based on Monte Carlo projections, assuming withdrawals taken at end of the year.

4 Asset Allocation content uses the GAAC 8-15 strategic asset allocation, due to the accumulation phase demonstration.

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