Page 148 - Ready Set Retire

Stephen J. Kelley

like Cypress...and the SEC and Wall Street community call this
“prudent.”

And the thing is, spreading the risk is so much more valuable
than a point...two points...even five or six points in return. And
it’s tax free, safe and largely free of fees.

If I, as an income planner, am asked to create a plan for just
you, an individual (or couple if you are married), I have a small
pool of people to work with. Miniscule. A pool of one or two.
And since we most likely have no idea how long you will live,
I must plan on you living as long as is possible (or likely
possible). Now today life expectancies have risen dramatically
and they continue to rise. The older you are, the longer you are
expected to live.

Statistically, if you are married and age 65, there is a greater
than 50% chance that one of you will live to age 93. That’s
nearly a 30 year planning horizon.

So assume you have $500,000 saved up for your retirement.
Now, as a prudent planner, I would want to be sure that you
had enough money to last the whole 30 years. So, not knowing
what kind of rate of return you could get, I could simply divide
500,000 by 30 and advise you to take no more than $16,667
per year, or about 3.3%, guaranteeing you have enough money
for the rest of your life. Good, but not great. In line, not so

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