I've seen a lot of new research and thinking recently that, taken together, threatens to upend everything we think we know about retirement distribution planning. I think this may be important as more clients march into retirement under the guidance of their financial planner.
At the AICPA Personal Financial Planning conference in January, Jim Shambo, president of Lifetime Planning Concepts of Colorado Springs, Colo. - an out-of-the-box thinker if ever there was one - asked a deceptively simple question. Our Monte Carlo engines assume that clients will spend a certain percentage of their total retirement portfolio in the first year (4% is the safe harbor amount), and then require that same dollar amount, going forward, for the rest of their days, adjusted for inflation. Analyses by Jon Guyton, a principal of Cornerstone Wealth Advisors in Minneapolis, and others show that we can adjust that safe harbor upward a bit if clients are willing to freeze their spending in down markets and limit their raises.
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