Researchers analyzed a hypothetical married couple of 65-year-old retirees. The husband receives a Social Security benefit of $12,000 annually, while the wife receives $6,000 through a spousal benefit, making their total household income $18,000 per year. Excluding the value of their home, the couple also holds $250,000 in financial assets invested in a mix of stocks and risk-free bonds, with an allocation that changes with age, realized returns and the assumed coefficient of risk aversion.The bonds have an assumed real interest rate of 3%, while stocks are assumed to have a real return of 6.5%.
Tweaking the RMD formula so that withdrawals for the couple begin at 65, the retirees pull a growing percentage of assets each year for their income, starting at a rate of 3.13% and then going as high as 15.87% at 100.
To compare this strategy with others, the paper used a measure called Strategy Equivalent Wealth, which represents the factor by which the dollar value of the couple’s wealth at 65 must be multiplied so they are as well off as a household that follows the optimal strategy. Researchers gave the optimal strategy an SEW of 1, while those that are suboptimal are greater than 1.
This is a very interesting research study. Although every individual is different this might be an excellent withdrawal to maintain an income throughout your lifetime.
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