Please take a few minutes to watch this video that demonstrates a key insight into retirement planning that is often overlooked.
Life is funny. For the first half of our life we're told we need to turn our income into assets. But in the second half, all of sudden, we're told we need to turn those assets back into income. But we don't know when to start, if we have enough, and how long the second half will last. When we consider that the end goal of saving for retirement is income creation, the dilemma of how we should position our assets today becomes more clear.
Sequence of Returns
In retirement, market volatility puts us in the position to decide how much of our nest egg we are allowed to spend before we know what we're going to earn. It's unclear how much we can spend today and how much we should reserve for years with down markets.
How Long We'll Need Income
None of us know when we're leaving this world. This obvious truth has an enormous impact on how we can spend our assets in retirement. It's unclear how much of our assets we can spend today and how much we should reserve for the hopefully many years to come.