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Subject:  Re: Income Planning Assumption Date:  6/5/2007  2:46 PM
Author:  pauleckler Number:  57784 of 88513

Welcome Rhoski. Glad you could join us.

Most people use 4% as the acceptable burn rate. That is to say, you can expect to spend about 4% of your investable assets on your living expenses (and income taxes) in retirement, and still have your assets last for 30 or more years in retirement.

The actual number varies somewhat depending on various factors, but if you are splitting hairs on this, don't retire. Lower burn rates are aways better. If you can manage 1% or 2%, do it.

For this to work, you need your assets to earn at least double your burn rate. So many of us would use 8% as a typical number.

They tell us that over time, the S&P 500 will earn 11% per year. And many of us have seen years where the number was in the 20 to 30% range. Occasional years well below 11% do happen. But 8% seems reasonable as a target--provided you are invested mostly in equities. Bond investors won't be able to do that. So they need to be in the 2% burn rate range to have a shot at it. Otherwise, they will spend down their assets and risk running out of funds. (They might be better off with an annuity if they are risk averse. Here, you let the insurance company take the risk for you--for a nice fee.)

Ask away if any of this requires explaining.
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