Retirement Income - Risk Pyramid

by Mary Beth Franklin


This alternative model for retirement withdrawals delivers current income and future returns.

With a traditional risk-pyramid model, you use your safest investments -- such as bank accounts and certificates of deposit -- to build the foundation of your portfolio. Then you layer riskier investments on top, adding bonds, followed by various types of stock funds and alternative investments that might include commodities and real estate. Diversification spreads your risk, but it doesn't guarantee that you won't lose money.

By flipping the risk pyramid on its side, you can align your retirement timeline with your investment strategy. Fund your immediate income needs with risk-free investments, such as CDs or an immediate annuity, and gradually increase the risk (and potential return) of other investments. Every five years, use investment returns to replenish your guaranteed income.

CreateWealth8888's Retirement Income model:

Some ideas for retirement planning ..

You may be able to retire with $1M Retirement Fund at 55 if your yearly expenses is at 4% of your retirement fund i.e $40K with the following assumptions as follows:


1) Inflation Rate at 3%

2) CPF Life providing yearly income at $12K (assuming full minimum sum)

3) CPF OA balance at $300K to earn compound Interest Rate at 2.5%

4) $500K to invest in stocks with annual success rate at 40% of $500K providing 5% return (60% of the stocks under water and didn't provide any positive returns during the year)

5) $200K cash as liquidity earning compound interest rate at 1%

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