About the Proposed Single RWR Demo:
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With their current retirement plan, John and Mary Sample would have run out of money in their seventies if they would have continued doing what they planned.
But with RWR, and the asset allocation software on this site, they were able to survive just fine past age 100 with more income, security, and peace of mind.
Changes from the Current Retirement Plan Version are:
• John was able to get 10% more retirement income when he retired. His income goal went from $50,000 to $55,000 a year.
• Mary was able to get 15% more income when she retired. Her income goal went from $25,000 to $30,000 a year.
• A percent higher inflation rate was used to match higher expected inflation in the Proposed version. If it doesn't materialize, then they'll just have a little more money to spend. If it does happen, then they'll have been prepared. If inflation turns out to be even higher, then they'll be that much better off than if they weren't able to plan for it.
• They were able to keep all of their planned expenditures going.
• Their assumed tax rate went up 10% (from 20% to 22%), just to be more conservative and to plan for future increases.
• Their Social Security tax inclusion rate went from 50% to 8%, just to be more conservative.
• They were also able to keep their current home. They thought that they would have to downsize after the kids graduated college, but it turns out that if they stuck with the plan, they'd be just fine. They can pass the home to their children, the whole family will have a nice place to meet on holidays, and they can pass away in peace where they grew up. This difference in income goals is in the income manual override column.
• By analyzing their bond portfolio, it turns out that just replacing all of that with a good bond mutual fund, they were able to increase their return by 40% (from 3% to 6%), and do something better with the few hours per week spent managing it. They also realized that just planning to spend the interest was not practical. So they'll be on a mutual fund systematic withdrawal program instead. See the Oldest Asset #2 sheet.
• They sold off their portfolio of stocks and replaced them with a portfolio of well-allocated mutual funds. That raised their estimated rate of return from 6% to 8%. Using the Flexible payout method also helped over what they planned to do. See the Oldest Asset #3 sheet.
• They were able to reallocate their current employer 401(k) plan using the investment options they're stuck with while employed and captive. When they retire, they can roll them over into rollover IRAs, where they aren't limited to a small list of investment choices, then can use asset allocation with mutual funds.
This raised their estimated rate of return from 5% to 8%. They also slighting increased their rate of contribution growth. Using the Flexible payout method also helped over what they planned to do by selling stocks ad hoc.
• They got with the well-diversified asset allocation program with their IRA's and were able to cut their risk by half, and increase their estimated rate of return 25% (from 6% to 8%). Using the Flexible payout method also helped over what they planned to do. See the Youngest Assets #1 - 5 sheets.
• They were able to get out of a 2% CD and annuity and buy a diversified portfolio of mutual funds.
• John didn't have to sell his other gold nugget in the Proposed version.
• They bought Long-term Care insurance that turned spending hundreds a month in nursing home costs and medical bills into paying premiums of one-tenth that amount.
That's it. All it took was restructuring asset payouts, contributing a little more to their retirement plans, buying LTC insurance, getting rid of trying to market time and pick individual stocks and bonds by replacing all that with asset allocation using mutual funds, and they're all set.
They could also actually retire a year or so earlier if they were will to cut their spending a little too.
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