Paul Pent & Associates - Retirement Advice Blog

Financial Insight Blog




A Year ago, Bob (62) came to our office for a Financial Second Opinion. He had a mix of mutual funds and annuities with a total value of about $150,000. In his mind, Bob knew he needed to grow that money to $375,000 by the time he was 72, to fund a shortfall in his budget of $15,000.

He was going by an old rule of thumb taught by many money managers and brokers. It goes like this: If you have a nest egg and you want it to provide income for your retirement and you don’t want to run out of money, a safe withdrawal rate is 4%.

$375,000 x .04 = $15,000

The big problem? He needed a growth rate of 9.6% per year for 10 years to grow his money to his goal. The previous decade of the market had only done 2.23% and he had lost faith in the value of investing in mutual funds with asset fees of 1%.

2.23% - 1% = 1.23% (after fee)

Here’s where the problem was solved. Bob came in , and through a Financial Second Opinion, we showed him that he didn’t need $375,000. In reality he only needed to grow his supplemental nest egg to about $175,000.

The big question. Why? How? The answer: When you eliminate risk in your portfolio it is easier to promise higher pay-outs. Brokers quote a 4% withdrawal rate because they know your money is at risk and have to take loss of principal into account.

The pay-out Bob will receive at age 72 will be 7.9% for life. So if Bob’s account only grows to $175,000 he will be right where he needs to be.

$175,976 x .079 = $14,976

Bob came to us stressed and feeling behind in saving for his retirement. He left feeling relaxed knowing a larger portion of his savings was protected from the volatility of the market.

Go to or call 1-877-797-PAUL to schedule your Financial Second Opinion to see all the ways this type of planning can be used for your benefit. 

Also, if you would like a FREE video on this subject, we'd be glad to e-mail it to you. E-mail .(JavaScript must be enabled to view this email address)


What Others are Saying

Eric Eddler

Long-term annuities are a great way to ensure a steady flow of income during retirement. They allow for a sum of cash to be set aside, then funds are provided at a certain time period determined upon creation. One issue many have with this system is when a large amount of money is needed all at once, rather than small amounts over time. This is when selling the annuity becomes an option. Doing so will net you a lump sum of cash for settlement. This option is usually taken in times of emergency. Hope this was helpful.

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