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<<I plan to retire in two years. I will have a pension plan to draw upon plus s.s. plus my 401K. According to most formulas, I can cover approx. 60% of my income needs from my pension plan and s.s.. Therefore need income from 401 K for the balance. In order to keep my nestegg intact and also provide income--what would be the best investment strategy for my money. Some in fixed income, perhaps enough to cover income needs and the balance in stocks?>>

My simulations haven't been verified by anyone else, so take this as one person's opinion, but . . .

I've run this problem myself for my own planning. The answer I come up with is that I'll do better with 100% in stocks and drawing out 7% per year of whatever the starting balance happens to be. In the simulation I actually took quarterly distributions, but the results should be the same for monthly or annual sales of stocks. The principal will probably last forever. It'll keep pace with inflation, and the least I'll have to spend in any year is higher than it would be with any bonds or cash in the portfolio or with a higher or lower percentage drawn out.

Note to those who don't expect to live forever: You can take a little more than 7% per year, but not much, depending on how soon you are sure you'll be dead. I'm just not willing to bet on death coming in time, so I am at least for now planning to live forever.

Note to Pixy and others who care about the nuts and bolts: I ran a Monte Carlo simulation with 1,000,000 runs using portfolio allocations in 5% increments (100% stock, 95% stock 5% bond, 95% stock 5% t-bill, . . . 100% t-bill) and inflation (CPI) adjusted quarterly returns from stocks (S&P 500), bonds (30 year treasuries), and cash (6 month T-bills). Under criteria I don't want to go into here, even the risk-averse would prefer the outcome from pure stocks to any other outcome. If you want the details on how I did my simulation, I'd be happy to provide them by email. They're just too long and dry to put into a message board. If the Fool would like me to run the simulation using their database, I'd be happy to give it a try.
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