Personally Invested In Your Future™

  1. Understanding Your Withdrawal Rate: How Much Can You Afford to Spend in Retirement?

    The concept of a retirement withdrawal rate is a critical component of planning for successful financial independence.  The withdrawal rate is a middle ground between two competing forces: maximizing cash flow in retirement, while simultaneously preserving the inflation-adjusted value of your investments over the long-term.

    By withdrawing too little, you can deprive yourself of discretionary expenses that could be used to support a more enjoyable lifestyle or fail to make gifts to family members or causes you care about.  On the other hand, excessive withdrawals can risk a permanent and early depletion of your savings.

    Sustainable Income

    Historically, a 4% annual withdrawal rate from an investment portfolio has been a common rule of thumb for successfully maintaining financial independence throughout several decades of retirement living.  The thinking behind a 4% withdrawal rate is that it is sustainable.

    By way of example, a “balanced” portfolio of stocks and bonds has historically earned in the high single digits of annualized return.  If a portfolio earns an average return of 7% per year over the long term, while inflation averages 3%, a 4% annual withdrawal rate will preserve the inflation-adjusted value of a family’s assets.

    Financial planning research confirms that a 4-5% withdrawal rate is generally prudent, even when accounting for periods of stock market volatility.[1]  Still, there remain important reasons to be cautious and to consider other ways to test for sustainability.

    The biggest risk to retirees is what is called “sequence of return” risk (as we wrote about in this article).  If the stock market suffers large losses at the very beginning of retirement, it could permanently impair your asset base for withdrawals.

    Considering Your Whole Balance Sheet

    Importantly, you may have wealth that is not accounted for in withdrawal rate calculations.  The result is that retirement calculations can underestimate your financial strength.  Vacation homes, future inheritance, and certain illiquid investments are all “secret weapons” that should be considered to augment a strong financial plan.

    To improve the odds of building your own successful retirement plan, we recommend taking a holistic approach that incorporates the full scope of your wealth.  For example, the Retirement Shock Absorber® is our proprietary tool for retirement planning that factors in all of the assets on a family’s balance sheet that can be used for financial independence.

    Dynamic Spending 

    Research confirms that retirees in the early phase of their retirement typically spend more than retirees in their later years, even accounting for health care costs[2].  And this is generally a good thing, as it affords families the ability to live well and enjoy things like travel when they are healthy enough to do so.

    Given the retirement spending fact pattern, it may make sense to incorporate a dynamic spending plan.  Retirees in their 60’s and 70’s should plan on spending more, and having a slightly higher withdrawal rate, than when they reach their 80’s and 90’s.  This is something we refer to as “front-loading” your retirement needs analysis.


    Planning for sustainable withdrawals is one of the most important aspects of financial independence, but there is often more nuance needed than a simple rule of thumb can provide.  By incorporating all of your financial assets into a comprehensive plan, a clear picture will begin to emerge about what a robust retirement plan will need to include.  If you’d like to learn more or just get a second opinion of your situation, we would welcome the opportunity to begin a conversation.

    [1] Suarez, E. Dante and Suarez, Antonio and Walz, D.T., The Perfect Withdrawal Amount: A Methodology for Creating Retirement Account Distribution Strategies (August 3, 2015). Available at SSRN: or

    [2] JP Morgan Guide to Retirement 2019, p 23.  Online

  2. Mortgage Rates Update

    Mortgage rates in the U.S. fell to three-year lows recently, with the average 30-year fixed mortgage pricing at approximately 3.55% at the end of last week.  The 3.55% rate approaches the lowest 30-year residential mortgage rates ever seen in the U.S. housing market, which occurred in 2016.

    While most economists initially forecasted flat to rising interest rates in 2019, we have witnessed the opposite so far this year—a substantial pullback in longer term interest rates.

    Opportunity for Refinancing

    The decline in mortgage rates represents another opportunity for families to lock in long-term financing at near-historically low levels.  If you currently have a 30-year fixed rate mortgage priced at 4% or above, it is likely that you can reduce your housing costs by refinancing to a lower rate.

    According to a recent mortgage industry study, 9.7 million Americans stood to benefit from refinancing their mortgage with rates at 3.625%, with an average monthly payment savings of $267.  For a large mortgage, the difference in monthly payments could be substantially higher.[1]

    Though we have currently experienced a decade of below-average inflation in the United States, it has not always been this way.  If we think back to the late 1970’s and early 1980’s, interest rates were in the double digits.  Inflation and stagflation were high and a common part of the American public’s experience.

    Though we see no signs of imminent inflation coming to the U.S. economy, it does make sense to hedge against potential inflation over the long term, particularly if there is little cost to doing so.  Locking in a 30-year mortgage below 4% today provides a potentially valuable hedge against future inflation, when interest rates—and monthly mortgage payments—may be more costly.

    The Impact on Cash Flow

    As part of our comprehensive planning process, we often consider ways to improve cash flow.  Click here to learn more about our Cash Flow Toolkit™.

    Liability management is an important part of this cash flow planning.  While paying off a mortgage is typically the most impactful way to improve monthly cash flow, reducing your home loan to a much lower interest rate is another option.

    Even with lower rates, there are situations where it does not make sense to refinance.  The potential closing costs for refinancing can negate the benefit of a lower rate, if you only hold the loan for a short period of time.  If you plan to move or sell your home in the next 3-5 years, it may not make sense to refinance.  Additionally, a family planning to pay off their mortgage in the upcoming years may not wish to add years to the life of their loan.

    To discuss your personal situation and whether it makes sense to consider refinancing, we welcome the chance to speak about your financial plan.

    [1]Online at Black Knight.  Page 12.

  3. How We Provide Advice: A 150-Point Inspection

    One of the most common questions we’ve heard from prospective clients over the years is “If I become a client how will you help me?” It’s a good question and reveals the fact that it can be very hard to understand the services that a comprehensive wealth advisor will provide or the process they will follow.

     Vast Array of Issues

    You can think of our process as a 150-point inspection. That is the number of potential strategies and issues that we will consider, ranging from when to take Social Security to how to reduce income taxes to determining if your estate plan is aligned with your intentions.

    This vast array of planning issues is organized into eight broader categories which all fit together like a puzzle:

    Now, let’s look at the category of Retirement Planning as an example and consider the range of strategies and topics that fall within that broader category:

    We’ve got 20 potential issues being inspected just in this one category of retirement planning. As you repeat this process for each of the other categories, you can imagine how the full inventory of issues materializes.

    Of the 150 total strategies, there may be 20-30 that are highly relevant for a client at any given time and others that don’t apply. The remainder are items that will be important later on in the relationship – whether that is in 6 months or 6 years from now.

    Identifying Problems

    This process is similar to a car inspection in that it is designed to identify problems before they occur. Hiring a mechanic to fix a car that is having problems is good, but having that mechanic identify those problems before you are broken down on the side of the road is better.

    One personal financial scenario similar to the car with mechanical issues is an estate plan that is disorganized and scattered. If the financially savvy spouse dies first, the surviving spouse will likely be overwhelmed with trying to figure out dozens of pieces of account information and actions to take.

    One of our 150 points for this person would be to create a family financial organization plan for them in advance that preempts the chaos by providing a clear and detailed road map and structure ahead of time. Click here to download our Family Organizational Plan.

    An Ongoing Process

    Of course, there are always limitations to metaphors and this one is no exception. A car inspection is all completed at one time whereas our process is never “complete”.

    Far from being a simple checklist of items to process in one setting, it is a vast inventory of strategies that will evolve and change over time. The value of planning is in its dynamic nature as a living document that changes and adapts along with you and your family.

    Want a Complimentary Inspection?

    Just provide contact information below to request an initial discussion about your situation: