Another point: One study estimates that premium costs will drop for persons 55 to 64 by about 12%.
That's great, Susan. Thanks.
The reason for the possible drop in costs is that the law prohibits insurers from charging older folks more than three times the amount they charge younger individuals. Now insurers can charge older applicants five to six times the amount depending on the state. Of course, this is not great news for younger applicants, who are expected to see an increase in their premiums.
Interesting, Susan. Good news for my parents, but not for me!
And thanks, Rachel. The surtax is certainly something investors should keep in mind.
Alright, let's get started with our first question.
Hi Cindy, great question. Actually we're hearing a lot of financial advisers criticize the "4% rule" lately. One problem: It doesn't respond to investment performance. You're withdrawing a set dollar amount (adjusted for inflation) each year, regardless of your actual investment performance and income needs.
Ah, the "bucket" approach.
If you have a pension, you may not have to withdraw from your retirement plans at all for awhile. You may want to consider structuring your nest eggs into buckets. Set aside about two years of expenses into liquid money, such as money market funds. Then a second bucket could include short-term bond funds, which would replenish the first bucket. The third bucket could include stocks, which you could leave untouched and let grow for a longer term. Maybe once a year, you can take profits from your stocks and replenish the first two buckets.
Speaking of the bucket approach... Thanks, Susan.
Several great ways to approach the "draw-down puzzle. Thanks all. And thanks for the great question, Cindy.
Here's our next question from Mike
That's right Rachel, retirees can use the required minimum distribution rules as a spending guidepost, and recent research suggests this approach beats the old "4% rule." You divide your year-end portfolio balance by the life expectancy factor for your age listed in IRS Publication 590.
There is no earnings limit on Social Security benefits when you hit full retirement age, which for many people these days is 66.
Sounds like a great alternative, Eleanor.