Improving Your Finances: Wondering About Withdrawal Rates?

Noted retirement researcher and financial planner Jonathan Guyton visits to discuss his take. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=29602&elqTrackId=00eaee3f68de423cac8b79037302d659&elq=a473a4f48ee441f38df31795236df403&elqaid=29602&elqat=1&elqCampaignId=13605) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] As I write this, the yield on the Bloomberg Barclays Aggregate Index is about 1.4%. Meanwhile, a basket of high-dividend-yielding stocks, like Vanguard High Dividend Yield Index VYM, is barely paying out 2.5%. Those aren’t subsistence-level yields for most retirees. That means that a total return approach and yes, occasional withdrawals of principal, are facts of life for most retirees. And that’s OK. I’ve always said that it makes sense to build a diversified portfolio with sound risk/reward characteristics. When it comes time to start taking cash flows from it, your portfolio doesn’t know if those withdrawals come from income or from withdrawals of appreciated securities. The key question for retirees is how much they can safely take out. John Rekenthaler has been exploring that question from a variety of angles lately. He [noted]( that even though the past 30 years was extraordinarily good for retirees (low inflation, strong market returns) and would have supported a fairly high withdrawal rate, it may not always be thus. Being conservative on the withdrawal front, especially for retirees just starting out, is the prudent way to go. Amy Arnott reached a similar conclusion in [her research]( earlier this year. So is [holding ample equity exposure]( given that today’s low bond yields portend meager returns from fixed income over the next decade. Retirement researchers also seem to agree that being willing to vary your in-retirement portfolio withdrawals can go a long way toward improving the chances that your portfolio will last. One of the pioneers of this approach is Jonathan Guyton, who I’ve had the pleasure of interviewing on a few occasions now. Jeff Ptak and I interviewed Jonathan for our podcast (you can skim [the transcript]( if you’re not a podcast person) and I also chatted with him for [this video]( where he discussed the logistics of implementing a variable withdrawal rate system. Whether you’re already retired, just thinking about it, or have many years of work still ahead, I hope you enjoy the long weekend. With warm regards, Christine Benz [Wondering About Withdrawal Rates?]( Noted retirement researcher and financial planner Jonathan Guyton visits to discuss his take. [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [Which Charities Deserve Your Dollars?]( Charitable giving offers valuable tax breaks, but it's also worth checking up on a charity's effectiveness. [Read More]( [These Charitable Investment Strategies Deliver a 'Three-fer']( These three maneuvers will tend to deliver a higher tax benefit than writing a check and deducting it, and may even improve your portfolio. [Read More]( [Charitable Giving Strategies in 2021]( Donor-advised funds, gifting appreciated stock, and qualified charitable distributions are just some of the options. [Read More]( [Andrew Biggs: Create a Thrift Savings Plan for the Masses]( The economist and Social Security expert discusses whether or not there's a retirement crisis, and how the U.S. government's retirement plan could be a model for how low- and middle-income workers save. [Read More]( Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2021 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602