Several recent studies show peoples number one fear is running
out of money during retirement.
To prepare us for retirement the government gives workers the
ability to set up qualified accounts in order to save for retirement and get
tax deferred growth. By deferring taxes money saved can grow faster. You put
money away, not paying taxes now, but paying taxes on the money when you pull
it out during retirement.
When you get to retirement, you can start pulling money from
your account. In the past it has been considered good practice to not draw more
than 4% from an account during retirement in order to make sure you don’t
outlive your money. In the past bond yields have been 5-7% and that makes a 4% draw
down possible. Now over the past 5 years bond yields have been around 2-3% and
because many retirees rely on bonds to deliver income to their portfolio, many
economists and advisors have been advising clients to withdraw less from their
IRAs; this is so retirees don’t run out of money when they are older.
Now what if I told you there
was a government program that requires you to draw more income from your
account, without any consideration for how long you or your spouse will live,
and without regard for whether you will run out of money or not.
Continue reading “RMD: What are the Risks and How Can We Address Them?”