Is it possible to retire at the wrong time? Unlike previous generations that had the luxury of having their retirement funded by guarantees made by employers and/or the government, the assets youve accumulated in your 401(k) or IRA rollover could be your most important source of retirement income. Perhaps the most appealing feature of a pension is its guaranteed income for life, no matter when you retire or what happens in the market. Unfortunately, the same is not true of 401(k) and IRA rollovers. You can retire at the wrong time. Consider two different retirement portfolios: each starting with $500,000, invested in 60% stocks/40% bonds, and withdrawing $25,000 in annual income, adjusted each year for inflation.* In the example of investor A, the clients year end value was exhausted after 16 years of withdrawals, whereas Investor B began taking withdrawals 10 years later and their year-end value was not exhausted, simply due to the timing of the positive and negative performance of the market.

Investor A

30-Year Period ending 1995

Age

Year

ROR

Year-End Value

65

1966

-5.30%

$449,709

66

1967

12.80%

$478,107

67

1968

7.30%

$484,049

68

1969

-8.00%

$418,795

69

1970

9.40%

$425,093

70

1971

12.70%

$443,879

71

1972

13.60%

$467,416

72

1973

-9.80%

$389,765

73

1974

-15.20%

$297,166

74

1975

23.30%

$314,422

75

1976

20.90%

$326,575

76

1977

-5.50%

$263,924

77

1978

2.10%

$216,966

78

1979

9.40%

$173,583

79

1980

15.20%

$124,468

80

1981

-1.50%

$52,261

81

1982

29.30%

Exhausted

82

1983

13.50%

Exhausted

83

1984

9.50%

Exhausted

84

1985

30.70%

Exhausted

85

1986

24.10%

Exhausted

86

1987

0.40%

Exhausted

87

1988

13.50%

Exhausted

88

1989

27.80%

Exhausted

89

1990

0.30%

Exhausted

90

1991

25.10%

Exhausted

91

1992

8.90%

Exhausted

92

1993

14.00%

Exhausted

93

1994

-3.70%

Exhausted

94

1995

35.30%

Exhausted

Average Rate of Return 9.60%

Investor B

30-Year Period Ending 2005

Year

ROR

Year-End Value

1976

20.90%

$574,111

1977

-5.50%

$517,139

1978

2.10%

$498,363

1979

9.40%

$509,115

1980

15.20%

$543,996

1981

-1.50%

$496,227

1982

29.30%

$587,449

1983

13.50%

$617,562

1984

9.50%

$626,730

1985

30.70%

$757,961

1986

24.10%

$881,527

1987

0.40%

$835,566

1988

13.50%

$889,730

1989

27.80%

$1,067,888

1990

0.30%

$1,013,459

1991

25.10%

$1,193,724

1992

8.90%

$1,234,005

1993

14.00%

$1,334,840

1994

-3.70%

$1,223,213

1995

35.30%

$1,566,115

1996

14.00%

$1,707,435

1997

25.60%

$2,057,859

1998

23.50%

$2,454,653

1999

8.90%

$2,593,091

2000

1.30%

$2,551,012

2001

-5.60%

$2,335,432

2002

-7.70%

$2,083,696

2003

17.30%

$2,351,418

2004

8.30%

$2,458,423

2005

5.60%

$2,505,585

Average Rate of Return 11.40%


* This illustration does not account for taxes or fees. Sources: Standard & Poors; Federal Reserve; Bureau of Labor Statistics. Data based on two 30-year periods ended on December 31, 1995 and 2005, respectively. Each portfolio assumes a first year 5% withdrawal that was subsequently adjusted for actual inflation. Each portfolio also assumes a 60% stock/40% bond allocation, rebalanced annually. Stocks are represented by the S&P 500, an unmanaged index. Bonds are represented by the annualized yields of long-term Treasuries (10+ years maturity). Inflation is represented by changes to the historical CPI. Investors may not invest directly in any index. Past performance does not guarantee future results.  This is a hypothetical example and is not representative of any specific investment. Your results may vary.