A. While most people know the "4% withdrawal" rule of thumb, implement it is not an easy task. There are two new ways being introduced to specifically meet the "steady paycheck" needs:
Method 1. Managed Retirement Income Funds
A managed retirement income fund is designed to make steady monthly payouts to retirees, while maintain principal safety. Given the low interest environment, it's understandable the annual withdrawal rate can't be high, even 4% is probably a challenge. For example, the American Funds' Enhanced Fund (NDARX) is designed for a 3% to 4% withdrawal. Its sister funds, the Conservative fund (NAARX) and the Moderate fund (NBARX) are designed to support annual 2.5%-3% and 2.75%-3.5% withdrawals.
The problems with such managed retirement income funds? Higher fee is one, more importantly, there is no guarantee to such steady paychecks, the funds' performances are still subject to the market's ups and downs.
We will discuss the second new method in our next blog post.