Words from Woods: Luck – Can you afford it?

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bob_woods_march_13St. Patrick’s Day is fast approaching, and with it comes thoughts of the luck of the Irish and pots of gold at the end of a rainbow.  An old saying goes, “It’s better to be lucky than good.”  So we carry around a rabbit’s foot, horse shoe, four leaf clover, or a lucky penny hoping for the best of luck for ourselves.

But should we be relying on luck for the most important decisions of our lives?  Can we take that chance? Well, that’s the position we put ourselves (and our families) into when we don’t build the elements of safety and assurances into our retirement nest eggs.

Several years ago, a large, well known, mutual fund company (you’d know it if I said it) examined several methods of securing reliable, steady income from an equity based (stock and bond) retirement portfolio. They predicted an 89% chance of sustaining income for 30 years using their best income model.  What they found, after applying actual market performance to their most recommended plan during that ten year period “…investors who adhered to this model, prepared for them by their financial professional, now stand only a 29% chance of receiving income from that plan throughout their retirement…put bluntly, a 71% chance of running out of income!”

Many advisors cling to the old school philosophy of an equity based portfolio and a set percentage withdrawal rate in an attempt to maximize the accounts’ longevity so as to “hopefully” not run out of money before the person runs out of life!  The predictions and illustrations used to support these plans rely on hypothetical rates of return and past performance.  Unfortunately, the disclaimers on these plans, in spite of high visibility on the literature and loud proclamations in the voice ads are largely ignored.  And, if that’s the case, are we not depending on another element, perhaps luck, in an attempt to assure our financial success?

So, regarding your own retirement income, can you afford to rely on luck in this most important decision?  Or would you feel more confident knowing that your retirement income was contractually guaranteed for your lifetime?  No “maybes”, no “I hope” no leprechauns! Give us a call.

Happy St. Patty’s Day.

As always, I wish you Good Fortune
Bob Woods, President
Woods Financial

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