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“How much money do I need to retire comfortably?”  That’s a question every adviser dreads hearing – because the answer is difficult.  The easy route used to suggest that you could draw 4% of your nest egg in retirement, and never run out of money.

So – just multiply your desired monthly draw by 20 – and voila – there’s how much money you need.  Want $5,000/month – you need $1.2 million.

But two factors have the mainstream advisory community re-thinking that axiom.  First, people are living longer, so the money has to last longer.  Second, the kinds of fixed-interest rate instruments they typically recommend, are not generating enough earnings to last that long.

A recent Wall Street Journal article suggests that as many as 50% of retirees could run out of money before they run out of life if they use the old 4% rule.  That’s a scary proposition.  But what’s the answer?

Put at least some of your money into things that either guarantee lifetime income; or that have non-depleting accounts.  Despite the complaints we may have with social security, it is just such an account – guaranteeing income payments for life – even beyond in some cases.

Outside of Social Security, guaranteed lifetime income can come from instruments like deferred and immediate annuities, Charitable Gift Annuities, and certain kinds of cash-value life insurance.  Comment back to get more information.

Whatever you do – don’t buy into the 4% rule and think you have it made.