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Deciding Whether to Take a Pension Lump Sum: The 2 Opposing Methods

The following is a guest contribution from reader and fellow blogger Grumpus Maximus, a 40-something U.S. military officer with 18 years of active duty service under his belt. Grumpus has recently realized that, with some minor lifestyle adjustments, he will reach Financial Independence by his military retirement point. With no formal education in finance, but …

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Managed-Payout Funds: One-Stop Shopping for Retirement Income?

The holy grail of retirement income is guaranteed, inflation-adjusted payments that last a lifetime, with principal left over. Annuities offer that kind of lifetime income, at the cost of giving up your principal. But true inflation-adjusted annuities are hard to find, and very expensive. On the other hand, investment portfolios with a sizable allocation to …

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Raising Cash: My Retirement Withdrawal “System”

Our cash was running low. It had been a year and a half since I sold significant assets. Last month, when I added up our liquid reserves, they were down to about six months of living expenses. For many a young worker that would be a cushy emergency fund. But for me — an early …

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Generating Retirement Income Before Age 59-½

You’ve saved diligently your entire working career. You’ve maxed out your retirement savings accounts. And it’s paid off. You’ve reached the point of financial independence, early. Or, maybe you were laid off, or took an early severance package. Whatever the reason, like me, you got to retirement ahead of the usual schedule. Maybe in your …

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Dealing with an Inherited IRA

The letter caught me by surprise. Titled “IRA/ESA Certificate Maturity Notice,” it was from a major credit union where, so far as I knew, I had no accounts. The document went on to say that an IRA Certificate of deposit, with my name on the account, was scheduled to renew soon for the specified term. …

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What to Do With a Lump Sum in Retirement

It’s a common problem in or near retirement: A relative passes away and leaves you an inheritance. Or you receive a lump sum pension payout. Or you sell the big family home and downsize. In each case you suddenly have a large sum of cash on your hands…. What should you do with the unexpected …

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The 3 Stages of Retirement Income

In real life, retirement cash flow is not as simple as the pundits would have you believe. Try a typical retirement calculator, and you’ll be prompted for a single expense number: How much would you need to spend from savings to live in retirement each year? But research shows that your gross expenses will change, …

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The Best Retirement Withdrawal Strategies: Digging Deeper

A couple of months ago I published new research here. The topic was retirement withdrawal strategies. I was trying to answer a question that had long puzzled me. It’s one that I hadn’t seen addressed elsewhere: What is the best way to liquidate the asset classes in your retirement portfolio? For example, if you have …

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New Research: The Best Retirement Withdrawal Strategies

Many retirees will use systematic withdrawals from an investment portfolio for retirement income. I’ve done new research into the best retirement withdrawal strategies. History shows that your success can vary widely using the same portfolio and the same overall withdrawal rate, without changing your investments. It all depends on how you withdraw from different asset …

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Are You Feeling Lucky? The Two Schools of Retirement Income…

Are you feeling lucky? That’s how the debate between the two schools of retirement income often shapes up. Do you keep your retirement assets in the stock market, where you’ll have more flexibility and better odds for long-term financial growth, along with a chance of failure? Or do you go the safe, secure route and …

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Running Low in Retirement: Income Strategies

Running out of money before you run out of life. It’s the biggest fear many retirees face. And, for baby boomers and succeeding generations without guaranteed pensions, it’s not just a night terror — it’s a realistic concern. Without adequate savings, a prudent lifestyle, and regular financial checkups, running low in retirement is a very …

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Why You Need Multiple Sources of Retirement Income

The weather is unpredictable in the high mountains. We carry special clothing for sun, bugs, wind, rain, and cold. There is no single garment that works for all conditions. In generating retirement income, you need diversity too. There is no single income source ideal for all conditions. Some types of retirement income are good for …

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Annuity Shopping: Time to Buy a Deferred Income Annuity?

I want to buy an annuity. As I’ve written before, they make sense to me, in theory. In practice, I’m having a hard time pulling the trigger…. We received a modest inheritance. It doesn’t change our financial picture substantially, but it does mean we have some free cash to put to work — money we …

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Retirement Withdrawal Strategies

You’ve worked and saved for years, most of a career. Maybe you’re looking at a traditional retirement in your 60’s, or you’re one of the fortunate few who are able to consider earlier retirement. Either way, you’ve amassed a sizable nest egg. Your assets are likely well into seven digits, unless you live very frugally, …

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Annuity Shopping: GLWBs and Asteroid Insurance

Vanguard made waves in late 2011 by introducing a budget-priced Guaranteed Lifetime Withdrawal Benefit (GLWB) rider on its variable annuity. I knew I would be in the market for guaranteed lifetime income at some point. And, though I didn’t know much about the option then, I felt better knowing Vanguard offered one. Plus, there seemed …

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How to Model the Retirement Income Gap

The textbook, or fairy tale, version of retirement goes something like this: you work your entire career, until you save your retirement "number," or reach the pension or Social Security age around 65 (later for many boomers). Then, your paycheck stops and your retirement income starts. This is a convenient fiction for discussing retirement in …

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The Optimal Mix: How Much Annuity Do You Need?

Lately I’ve been writing about the case for annuities and my gradual acceptance of their likely role in my own retirement. (See Why an Annuity Could Be in Your Future and A Floor with an Upside: The Best Strategy for Lifetime Income?) Unless you commit to an extremely frugal lifestyle, or build assets into the …

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Blueprint: Retirement Income

A Floor with an Upside: The Best Strategy for Lifetime Income?

Could you live off your investment portfolio indefinitely, if you had too? The answer to that question lies in the relationship among your total assets, your living expenses, your investing skill, the length of your retirement, market valuations when you retire, and market performance thereafter. That’s a lot of variables, only some of which you …

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Why an Annuity Could Be in Your Future…

If you’re like many independent-minded boomers who cut their teeth on the market conditions of the 1990’s, you may harbor serious suspicions about annuity products. Who needs an annuity? With the stock market averaging near double-digit returns in the past, you could easily live off 4%, 5%, even 6% of your portfolio every year, without …

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New Ideas for Retirement Income

How to save for and then generate enough retirement income is a central theme here. It turns out that the tools used to accumulate sufficient assets to retire — portfolio diversification according to Modern Portfolio Theory — are probably insufficient to plan for producing income in the distribution phase of retirement. A while back I …

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