The Withdrawal Policy Statement

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How do you know if you are prepared for your retirement?

New tools make it easier than ever to create a retirement income plan. A&I Financial Services provides a withdrawal policy statement. The financial planners at A&I have over 100 years of combined experience. Using state-of-the-art technology, and our experience, we make it easy for you to build a financial plan with confidence. Most importantly, a retiree will start their retirement income journey with confidence that they will not run out of money with the withdrawal policy statement.

What is a withdrawal policy statement?

At a glance, a withdrawal policy statement (WPS) shows you how much money you can pull out each and every year of your retirement. The WPS can be customized to show you monthly income, quarterly, semi-annually or an annual income. Plus, it can vary for your age. Many people are more fit and active in the early years of retirement. They want to pull out more money early on, during the fun years. The WPS enables you to plan for vacations, family trips, more entertainment and a larger eating-out budget, and more.

On the other hand, some people worry about health expenses near the end of their retirement. The WPS can provide a large amount of money near the end of your life for long-term care expenses, like a nursing home. If you are worried about alzheimer’s and other forms of dementia, the WPS can provide a cushion of money to pay for your care. This provides you ease-of-mind today.

With a withdrawal policy, you can invest the money for the long haul, earning possibly much higher rates of return. Many people fear investing in equities today because of Covid-19, world events, and other reasons. This can make it dangerous to stay retired because the portfolio needs to grow over the long haul. The WPS provides steady income and allows the retiree to stay invested for the long haul.

A withdrawal policy statement provides an increase in income each and every year. You can give yourself the best chance to stay ahead of inflation. By knowing in advance what the increase in income will look like, the retiree can rest assured that she will not lose her purchasing power. Again, the WPS provides peace of mind in advance of the first income check.

What happens if equity markets decline in value?

If equity markets decline in value, you will know whether or not this affects your retirement income. Before taking the first retirement income check, the WPS states in a clear, bold font how a large decline in the portfolio may lead to a small decline in income. Usually, the WPS factors are something like a 20% decline in portfolio value leads to a 10% decline in income. A retiree who knows this in advance can plan accordingly, and feel secure that she will be safe later in life.

How can I give myself a raise?

Conversely, if equity markets take off, you can give yourself a raise. Before you set off on your retirement income journey, the withdrawal policy statement gives you a goal for the portfolio. If it rises by some percent, then your income also rises. This is a great motivator to help the retiree stay invested for the long haul.

Financial planning provides you the confidence that you can create an income from your retirement savings. Consider talking to your financial advisor about the withdrawal policy statement.

About the author

Karl Frank, Certified Financial Planner ®, MSF, MBA, MA, is the President of A&I Financial Services LLC, a local business that specializes in wealth management, insurance planning, and retirement planning. Karl cares for business owners and the businesses that care for them. Learn More about Karl.