Retirement preparation is about planning and adhering to the plan, which includes both saving and investing.
Many plan from the start to live on withdrawing 4% of their investable assets per year in retirement, which fluctuates as time goes on, according to the value of their account. This relatively small withdrawal rate can help insulate them from market declines because they know that amount is just 1/20th to 1/25th of their portfolio.
As an investor, if you can accept fluctuations in the value of your account and understand that markets are priced to get a greater return on capital than bonds or cash, then you will feel comfortable staying in. The key is to keep investing and adhering to your plan during all kinds of markets. The important thing is to focus on what you can control. It doesn’t really matter what the markets are doing when you have a plan and adhere to it. If you spend 4% a year and the global equities decline, it becomes an opportunity to rebalance and buy more global equities. If the market rises, then you sell stocks and buy fixed income.
There is always going to be accumulation and decumulation. Success in the market is about staying the course and not worrying about what the neighbors are doing or not doing. How you spend your time during retirement is an important thing to plan for as well. Keep the following in mind when contemplating retirement: money isn’t everything.
Contact us today if you have any questions about how you’ll spend your retirement years.