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The New Rules of Retirement by Robert C. Carlson

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Chapter 5Managing Your Nest Egg

Most investment plans for retirees and preretirees are wrong. They aren't likely to deliver the risk-adjusted returns or income the investor needs to fund spending during the post-career years. Some don't have enough inflation protection or take too much stock market risk for someone in or near retirement.

At this point, you have estimated retirement spending and determined how much income to receive from guaranteed sources of income. You also set a policy for withdrawing money from the part of your nest egg that doesn't generate guaranteed income, your investment portfolio. You're going to review that withdrawal policy regularly and adjust it as necessary to make your nest egg meet your goals.

The next step is to learn how to manage your investment portfolio. You need an investment plan and strategy that will complement the withdrawal strategy. The withdrawal strategy assumes a minimum investment return or income yield. That goal must be met for the nest egg to last long enough to supplement your guaranteed income for life and meet any other goals you have, such as leaving a legacy for loved ones.

The investment needs of retirees and those nearing retirement historically received little attention from either the financial services industry or academics who studied investing. For the first generation or so of retirees that didn't matter. Most of their income came from guaranteed sources, and they didn't live long in retirement. They followed a ...

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