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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Increasing my pension Date: 12/31/2000 8:17 AM
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Greetings, Lazy, and welcome. You wrote:

I am retired and have a small work pension plus $150,000, which I want to invest in a safe investment to provide additional income (not capital gains). Where would you advise me to invest it? I would hope to draw down 7% p.a. or more and still safeguard my capital from depreciation.

I'll leave the investments strictly up to your. Instead, I'll just point out that preserving your capital while taking an annual withdrawal of 7% is highly unlikely to be successful over the long-term.

A number of studies have looked at this issue, and all basically say you may take an intitial withdrawal of 4% to 6% of a portfolio consisting of roughly 75% stocks and 25% bonds. In each subsequent year, you may then increase your initial dollar amount by the inflation rate for the most recent year. By doing so you will have a high probability the portfolio will last as long as you do.

You can read more about the issue in "How Much Are You Gonna Take" at http://www.fool.com/retirement/manageretirement/manageretirement8.htm. That missive explains the concept and provides some links to some studies explaining the process. You will find some great material in ""The Retire Early Study on Safe Withdrawal Rates" at http://www.geocities.com/WallStreet/8257/restud1.html.

Regards..Pixy
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