We spend a lot think about the risk of running out of money in retirement. But one understated risk of spending conservatively in retirement is the risk of dying with too much money!
In this video, we examine the Kitces Ratcheting Withdrawal Strategy. This strategy was first described by financial planner Michael Kitces in his 2015 article.
Kitces’s main point is that Bengen’s baseline withdrawal rule is too conservative. This is because it’s based on the worst historical sequence of return. In reality, an overwhelming majority of market scenarios would support a higher withdrawal rate.
So, Kitces proposed that a retiree starts out with the baseline withdrawal rate, but can increase their spending by 10% if the portfolio value exceeds 150% of the original value. There’s a caveat: these spending increases can only take place once every three years at most.Read More