Monday, January 30, 2017

New Financial Metrics for Retirement

While working on my annual liquid net worth summary, I realized that the metrics I used prior to retirement may not be as relevant during retirement.  So I am looking at new metric options to quantify if I am meeting our retirement financial goals. Here are some metric options I am considering:
  • Recurring income vs. annual expenses.   We've had pretty staple expenses over the past five years.   As I build our portfolio of dividend paying stocks, CDs, rental properties/REITs, annuities and capital gains, I will compare the income from these investments as a percentage of annual expenses. The target is greater than or equal to 100%.
  • Longevity of annual expenses or 4% withdrawals.  There are calculators that show the expected years retirement savings will last at a specific withdrawal rate (with cost of living adjustments), and a specific invest return.  I will use a conservative return equal to the U.S. 10 year bond. The target is greater than or equal to 35 years.
  • 4% withdrawal rate vs. annual expenses.  I will calculate the 4% withdrawal rate at the beginning of the year and compare it to our annual expenses.  The target is greater than or equal to 100%.
I will use one or more of these metrics to quantify our financial results starting this year.

For more on Strategies and Plans, check back Mondays for a new segment.

This is not financial advice. Please consult a professional advisor.

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