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Retirement Income: Will Yours Last?

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I talk to a lot of investors, and many of them are worried about retirement. They wonder what it will be like to stop getting a paycheck and whether their savings will last long enough.

Retirement used to be pretty straightforward: You stopped working and started getting a pension. Prior to the financial crisis, as pensions became more rare, you could still buy Treasury securities that generated yields of 4 to 5 percent--enough to be comfortable.

But since the financial crisis, you often have to take on a lot more risk to generate that sort of yield. And with this low-interest-rate environment looking like the new normal, income from interest and dividends alone just isn’t enough for most retirees.

One solution is to expand your idea of where you can look for income from your portfolio. Think about harvesting capital gains along with interest and dividends, and even spending down some of your principal.

I know that can sound scary.  But that’s because investors often haven’t had an easy way to understand how long their money could last. And research shows that many retirees actually spend far less than they could.

So let’s say you’ve worked hard all your life and saved $1 million for retirement and you need your investments to generate $40,000 a year. You can do that by selling some stocks and collecting dividends and interest. Some years, you may have to dip into the principal, but other years the portfolio generates much more than that. 

What I tell investors is: focus on what you can control. You can’t time the markets or predict interest rates, but you can take steps to save money on taxes, keep costs down, diversify your portfolio, and minimize the number of decisions you have to make.

A new feature within Schwab Intelligent Portfolios can do all of this for you AND projects how much you can withdraw to help make your money last. It’s called Schwab Intelligent Income.

Retirement should be a time we look forward to, but unfortunately for many people it’s stressful. At Schwab, we’re always trying to make retirement a little simpler and a little easier. A little more like we all want it to be.

Schwab’s Kathy Jones (SVP, Chief Fixed Income Strategist) explores the challenges modern retirees face when planning for a reliable source of retirement income.

What you can do next

Important Disclosures

Please read the Schwab Intelligent Portfolios Solutions™ disclosure brochures for important information, pricing, and disclosures related to the Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium programs.  Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ are made available through Charles Schwab & Co. Inc. (“Schwab”), a dually registered investment advisor and broker dealer. Portfolio management services are provided by Charles Schwab Investment Advisory, Inc. ("CSIA"). Schwab and CSIA are subsidiaries of The Charles Schwab Corporation.

Schwab Intelligent Income™ is an optional feature for clients to receive recurring automated withdrawals from their accounts. 

Schwab does not guarantee the amount or duration of Schwab Intelligent Income withdrawals nor does it guarantee any specific tax results such as meeting Required Minimum Distributions.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, you should consult with a qualified tax advisor, CPA, financial planner or investment manager.

Diversification, asset allocation, automatic investing, and rebalancing strategies do not ensure a profit and do not protect against losses.

Tax-loss harvesting is available for clients with invested assets of $50,000 or more in their account. Clients must choose to activate this feature.

©2020 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC (0120-94G5).


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