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John Grobe

On June 3rd, FEDweek’s Retirement and Financial Planning Report led off with an article that had the headline: Three-Fourths Expect Assets to Decline in Retirement. The article described the results of research done by the well-known Employee Benefit Research Institute that came up with this shocking (just kidding) information. The participants in the research were retirees aged 62 – 75. I’m amazed that 23% of the research participants expected their assets to grow (14%) or stay the same (9%). Why are they saving for retirement if they’re not going to spend the money?

We set money aside in our Thrift Savings Plan, or in other vehicles like Individual Retirement Arrangements, deferred annuities, and taxable accounts in order to be prepared for our retirement. After all, FERS and Social Security together are likely to give us no more than 60% of our pre-retirement income. We’re setting more money aside so that we can have a higher standard of living once we stop working and retire.


If my salary today is $100,000 and I want to have a retirement income of $80,000 (many financial planners say that 80% of our pre-retirement income will give us the same standard of living we had prior to retirement), I will need to have enough money set aside to generate $20,000 of income. The $20,000 would need to be adjusted annually for inflation in order to keep up with the ever increasing cost of living.

To be able to generate an inflation adjustable $20,000 per year, the same financial planners would tell me that I need to have set aside $500,000 by the time I retire. This is based on the so called “4% Rule” which posits that if you withdraw at a 4% rate your odds of running out of money within 30 years are miniscule.

Let’s say that I’ve managed to accumulate $1,000,000 by the time I retire; I’m still going to be spending it down in my retirement. I may end up with $500,000 when I die, but I still won’t have as much at my death as I did at my retirement. Don’t be like the 23% who said they would have as much or more at their death than they did at their retirement. Be like the 77% who are enjoying spending the money that they set aside for retirement. After all, that’s why you set it aside.

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