WILL I HAVE ENOUGH INCOME TO RETIRE WHEN (AND HOW) I WANT? (PT. II) - Interest Only

As we examine our fundamental question of?"Will I have enough income to retire when (and how) I want"?we look at the first of 4 distribution methods - "Interest-Only".

The concept of Interest-Only is the most common in the world of retirement income.?The idea here is we have a bucket of money that goes untouched and we draw interest from this bucket to fund our lifestyle.?Historically when interest rates were higher, this was an easier concept to execute, but with low interest rates investment returns have been put in as a substitute for the "risk-free" rate that was previously relied upon.?While substituting investment returns for a risk-free rate may not be a problem over a long period of time, this approach introduces new risks for a retiree to consider.?

We briefly touch on each of the 5 main risks a retiree faces in retirement and how this approach does or does not deal with these risks. Those risks being:

• Market volatility
• Outliving your money
• Health care costs
• Taxes
• Inflation

Methodology #1 Interest - Only:

Check back next time as we look at the second distribution method - total returns - a heavier reliance on the stock market.