A Million Dollar Impact.
Is one million dollars sufficient to support a carefree retirement?
It depends...
Diversification is KEY. Having all of your assets exposed to market risk is the leading cause of people fully depleting their money in retirement. Over the past two decades alone, the market has gone down by at least 25% more than FIVE TIMES. It is not a matter of if the stock market will crash again... but when. Once in retirement, the last thing you want to do is withdraw your hard-earned money at a loss.
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At Financial Fortress, we do things differently. We are able to build safe assets for clients that are not market-correlated. These assets are guaranteed to compound at least 5% annually and provide clients with a safe bucket of money to pull from in retirement when the market is experiencing a loss. Thus, all money exposed to market risk is allowed to recover and continue to work hard for you long-term.
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This integrated approach to financial planning is proven to work flawlessly.
A systematic distribution approach has the disadvantage of consistent withdrawals during down market years. Having a Cash Reserve to withdraw in those years allows the investments to recover before making withdrawals again.
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This example demonstrates the 20-year performance of a Traditional IRA after $60,000/yr was distributed annually from 2001-2020.
Distributions increase 2.1 %/yr for inflation.
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In 2021, the balance goes to $0 since there are not enough funds to withdraw the full target income amount of $90,920.
Using an integrated approach helps to preserve your account balance by strategically withdrawing funds from a Cash Reserve instead of from a Traditional IRA in the years following down markets.
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Strategically drawing $257,743 from a Cash Reserve instead of a market portfolio results in a $918,400 higher ending portfolio balance.