Page 150 - Ready Set Retire

Stephen J. Kelley

After all, $500,000 divided by 17 is $29,412 a year. FYI, that’s
5.9% a year. That’s a lot more than the $16,667 we initially
discussed for 30 years, and more even than the $20,000
annually that the Monte Carlo plan provides, and more than
the $14,000 provided by Morningstar’s 2.8% Rule. Since we
need no rate of return, it’s 100% guaranteed...just put it in a
CD or T-Bill or some other safe money vehicle and it will be
there every year like clockwork when you need it...until age 83.

Just plan for life expectancy and everything is great...unless you
are one of the “lucky” ones who live longer. So, what to do?
Plan for the long life and reduce your payout to $16,667, or
take your chances with more in the Monte Carlo plan?

Those are your choices. Bet on life expectancy and spend 5.9%
a year, or hedge your bets and take only 2.8%, which is less
than half. You decide. Choose. Because if you use a traditional
Wall Street (risky) approach, those are about your only choices.
Or you can purchase a variable annuity, whereby your advisors
get the 5% and you still must settle for less.

Of the people who plan in the traditional manner, 40% plan
for too short a life span and run out of money too soon and
40% plan for too long a life and die with more money than
they need. Only about 20% actually get it right.

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