CNBC Guest Blog

Published: Thursday, 15 Oct 2009 | 1:09 PM ET

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Question: I will retire in 5 years. How can I protect my money, both now and in the future? Dean, New Hampshire

Answer: Dean, when you talk about “protection”, I believe you mean principal protection. However, when I hear the word protection, I believe that what you really want to know is how to grow and manage your nest egg so it can generate a steady stream of income in the future.

Creating a steady stream of predictable income is easy. You can work with your current investment custodian and have them pay you income on a pre-determined basis. For example, many of my private clients take money two times per month to replicate their former biweekly paycheck.

Creating sustainable income is harder since we don’t know how long we’ll live. So you’ll need to monitor your withdrawals at least annually. Obviously, the less you take out, the lower inflation is, and the higher return you earn on your money, the longer it will last. Conversely, the more money you take out, the higher inflation is, and the lower your return is, the shorter your nest egg will last. Most experts agree that withdrawing 4% of your money every year beginning in year one and then increasing the amount of the withdrawal each year to account for inflation is a prudent strategy.

Creating increasing income is vital to your retirement success because the cost of goods and services is always going up. Even at a low inflation rate of 3%, you’d need to double your income in approximately 20 years just to maintain the same standard of living you have today. That’s why it’s so important to maintain at least some portion of your individual retirement account in the equity (stock) market.

Bill’s Bottom-line: Past performance is no guarantee of future results, but as of now, the equity markets have been the only place that has consistently delivered returns at or above inflation over long periods of time. To learn more, download a FREE 25-page report What Wall Street Doesn’t Want You to Know, available at www.MyRetirementSuccess.com.

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Bill Losey, CFP®, America's Retirement Strategist®, coaches women and couples nationwide with their retirement planning and investment portfolios.  Bill is the author of Retire in a Weekend! The Baby Boomer’s Guide to Making Work Optional and he also publishes Retirement Intelligence®, a free weekly award-winning newsletter.
You can learn more at www.MyRetirementSuccess.com .

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