There are over 60 million baby boomers in the US, most of which will retire over the next two decades. Most of them will generate income in retirement through social security, while some of the lucky ones will also enjoy a pension provided by their employers. Some boomers might also have some amount of money that they want to learn how to invest, in order to generate income in retirement.
Financial Advisers typically offer the four percent rule as a solution for managing one's money in retirement. This method assumes that investors will rely on total returns in order to monetize their portfolio for living expenses. According to the four percent rule, investors would spend four percent of their portfolio in year one of retirement, followed by an increase in distributions by factoring in inflation. For example, an investor with a $1 million portfolio invested in index funds and US treasury bonds would sell $40,000 worth of assets in year one. If we assume an annual inflation rate of 3% per year, in year 2 our investor would have to sell $41,200 worth of assets from his or her portfolio. The danger of this method is that it requires total returns each year in order to grow your portfolio, and avoid eating/spending your principal. Otherwise investors could end up depleting their asset base and might not be able to enjoy retirement for long.
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Laetitia Casta Claudette Ortiz Julia Stiles Marisa Miller AnnaLynne McCord
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