When Fidelity Investments asked more than 1,000 pre-retirees to guess the percentage that retirement planners would recommend withdrawing, 19% said 7–9% a year. However, a typical recommendation might be 4%. Additionally, another 19% of pre-retirees responding to the investment company’s Retirement IQ survey thought they could safely draw down their retirement funds at a rate of 10–15% a year. At that pace, they could risk outliving their money by their mid-70s.
If interest rates were a few percentage points higher in this bull market, such large annual withdrawals might be bearable. As interest rates are still low, many debt securities currently offer small yields. That forces today’s retirees to rely on equities to a degree their parents did not. Wall Street remains volatile, and some analysts see the major equity indexes making only minor annual advances in the near term. Whether their predictions prove true or false, a yearly withdrawal rate of 3–5% may help a retirement fund last much longer than one subjected to annual 7–9% distributions.
Are Golf Carts a Safety Risk?
In some Sun Belt communities, retirees drive golf carts off the links to run errands or eat out. While these electric vehicles are easy to operate and better for the environment than gas guzzlers, their open architecture can make them extremely dangerous in collisions with cars, bicycles and obstacles. Just how dangerous? By the estimate of the Consumer Product Safety Commission, there were nearly 18,000 emergency room visits stemming from golf cart–related injuries in the U.S. during 2015.
Even so, almost 400 American towns and cities permit golf carts on their streets, and drivers have learned to watch out for them. In some suburban retirement villages without adequate public transit, a golf cart trip takes the place of a bus ride. As a New York Times article notes, many of the serious injuries and occasional fatalities related to golf cart use are linked to impaired or underage drivers losing control of the cart or people falling out of the cart during sharp turns.
On the Bright Side
Fidelity says that during the fourth quarter of 2016, the average employee directed 8.4% of their salary into one of its workplace retirement plans—the highest percentage seen in nearly a decade.
Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Lighthouse Financial, LLC., a Registered Investment Advisor.Cambridge and Lighthouse Financial, LLC., are not affiliated.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.
1 – time.com/money/4689984/safe-withdrawal-rate-retirement/ [3/6/17]
2 – nytimes.com/2017/03/04/business/retirement/the-mostly-safe-golf-cart.html [3/4/17]
3 – fool.com/investing/2017/02/12/the-average-americans-401k-balance-has-never-been.aspx [2/12/17]