Beginning Retirement During Declining Markets

Retirement portfolios are generally intended to have withdrawals made regularly. These withdrawals provide the regular income necessary for a retiree’s living (and other) needs. However, when a multi-year downturn in the markets is combined with regular withdrawals, a retirement portfolio can deplete at a rapid pace.

The S&P 500 (a broad measure of large American business stocks) averaged a compound annual return over the last century of more than 9% (made up of the change in stock prices plus dividends). This long-term average has been remarkably consistent over long periods of time, but it is a poor predictor of returns over shorter periods of time. Let’s look at some examples to see why. Read the rest of this entry »