The tactic of withdrawing from an account that rises or falls with the market can be debilitating to your wealth. You are at the mercy of sequence of return risk (the potential consequences of a bad sequence of returns) at the time you begin withdrawing money from your investments (reverse dollar cost averaging).
If those don’t drain your account, you will most likely deplete it entirely just by living too long.
Adding guaranteed income products to a traditionally diversified portfolio may provide the potential to capture a portion of market gains, while potentially limiting losses when the market experiences a downturn. Using this model, explained below, can also help.
Time Segment Model
A more disciplined structure for creating retirement income. This approach is designed to spread your portfolio across multiple accounts, each designed to produce income over a certain period of time. How each account is invested depends on how soon the money is to be used. Typically, the initial segments are for immediate needs and may therefore be allocated conservatively in fixed rate or even guaranteed investment products such as certificates of deposit or immediate annuities that may not be subject to a fluctuation in principal. Segments designated for later use can be invested more aggressively. Since they won’t be touched for a while, they have time to overcome market corrections. Over time the aggressive segments will be shifted to more conservative products as retirement savings are used.
Using this model to build your investment portfolio may allow for continued steady income instead of just playing the stock market game of chance. If you aren’t sure that your current plan uses this model, maybe it’s time for a second opinion. Schedule yours at www.mysecondopiniontoday.com for a no obligation assessment of your current portfolio.
All investing involves risk, including possible loss of principal.