Determining Withdrawal Rates for Retirement Income

Many investors depend on interest and dividend cash flow from a tailored income portfolio as they transition into retirement.  A diversified allocation of bonds and high-yield stocks, in addition to a selection of growth-focused equities to keep pace with inflation, can provide the consistent cash flows necessary to transfer from a steady paycheck to a sustainable high quality of life in retirement.  A portfolio income strategy, however, should regularly be reevaluated and adjusted to account for contemporary market realities.  In a market with historically low bond interest rates, and with high equity price-to-earnings ratios that deliver relatively low dividend payout ratios, investors should be prepared to periodically withdraw for income a smaller percentage of their mark-to-market portfolio value than they would in market conditions with relatively higher interest rates and higher dividend yields.

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- Anthony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management