Perhaps the most appealing feature of a pension is its guaranteed income for life, no matter when you retire or what happens in the market. Unfortunately, the same is not true of 401(k) and IRA rollovers. You can retire at the wrong time. Consider two different retirement portfolios: each starting with $500,000, invested in 60% stocks/40% bonds, and withdrawing $25,000 in annual income, adjusted each year for inflation.
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Fragile First Decade
Don't be unlucky and suffer a "fragile first decade."
Finacial experts call it the "fragile first decade." If your portfolio suffers market losses in the first ten years, the chances of it lasting over a 30-year retirement are greatly diminished. Today's variable annuity can provide pension-like guarantees and help you avoid the fragile first decade.
Sources: Standard & Poor’s; Federal Reserve; Bureau of Labor Statistics. Data based on two 30-year periods ended on December 31, 1995 and 2005, respectively. Each portfolio assumes a first year 5% withdrawal that was subsequently adjusted for actual inflation. Each portfolio also assumes a 60% stock/40% bond allocation, rebalanced annually. Stocks are represented by the S&P 500, an unmanaged index. Bonds are represented by the annualized yields of long-term Treasuries (10+ years maturity). Inflation is represented by changes to the historical CPI. Investors may not invest directly in any index. Past performance does not guarantee future results.
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