but provides a company match and a pension as well. “I’ve been at UPS for 21 years,” says Veronica Floyd, 43, who is now a district controller in Milwaukee. “I started investing in the 401(k) plan when I was in my 20s, before most people are even thinking about retirement. There is a company match, and I contributed enough to get what I considered ‘free money.’” Employees at such companies should contribute at least the percentage that will be matched by their employer. In Floyd’s case, UPS matches dollar-for-dollar the first 3% of employee contributions.
Floyd, too, wants to be a member of the millionaire’s club by the time she retires at age 55. “From the forecasting I’ve done,” she says, “it appears that I’ll meet that goal. With my pension, my 401(k), my Social Security, and my company stock, I think I’ll have nearly as much or maybe even 100% of my current income after I retire.”
Financial Concerns Through the Ages
Builders: Younger than age 35
Reduce your short-term debt
- Credit cards, auto loans
- Money market funds, CDs
- Medical, disability, car, homeowners, etc.
- Life insurance: 10 times your annual income
Develop a systematic investing plan
- Focus on growth, not income
Providers: Age 35 to 50: Pay children’s expenses
- Private secondary school
- Retirement plan
- Supplemental savings plan
- Education fund
Maintain insurance coverage
Independents: Age 50 and Older
Pay down long-term debts: Mortgages, etc.
Review your investment portfolios
- Retirement plan adjustments
Focus on estate planning and long-term care
Source: A.G. Edwards
How much can you withdraw from your portfolio without running short of money over a long retirement? The following table assumes:
- Investors will withdraw a certain percentage of their portfolios in their first year of retirement.
- The amount of the first-year withdrawal is increased by 4% a year. That’s roughly the inflation rate over the past 30 years.
- The stocks and bonds in the sample portfolios earn their historic averages: 9.8% and 5.8% per year, respectively.
Depending on your portfolio mix and your first-year withdrawal rate, here are the chances you’ll be able to maintain this income stream over a 30-year retirement. As you can see, if you want to start with a 5% draw, you should keep at least half your portfolio in stock4and live with stock market volatility throughout your retirement.
Source: A.G. Edwards
|Withdrawl Rate||Success Rate|