The June 14 Tribune included an article on personal finance authored by Susan Tompor. It offered a guideline for annual retirement spending: 4 percent of one’s total portfolio. However, the article then states that 4 percent is just a guideline that can “help start a conversation.” What is missing in this article is a statement of the essence of this “conversation” — that is, of the next step.
My belief is that the conversation should not involve asking for opinions from numerous financial advisers or believing that one needs to achieve the best returns possible. Rather, the “conversation” is actually an action item — to learn how to use an analytical tool such as an Excel spreadsheet.
Dollars spent on financial advisers are better spent on taking courses on using Excel, for the knowledge of Excel will enable you to project your annual spending needs, to consider alternative investment portfolios and associated outcomes, and to determine for yourself how long your nest egg will last as a function of the assumptions made.
There are no right answers, only statistically defensible choices. Generating the actual annual numbers for oneself provides one with the best comfort available, far better than simply accepting the opinions of others.
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