Making The Nest Egg Last

By Erin E. Arvedlund
The Philadelphia Inquirer.

Just one in five retirement-age Americans is able to pass a basic test on how to make a nest egg last through retirement, if the results of a recent survey are any indication.

For example, the “4 percent rule” — considered a conventionally safe rate of withdrawal from your retirement funds — is a mystery to seven in 10 Americans, the survey conducted by the American College of Financial Services in Bryn Mawr suggests.

Sixteen percent of respondents said it was safe to withdraw 6 percent or even 8 percent of their retirement money per year, the survey found.

Social Security — when to claim it and how to make the most of the benefits — also perplexes most Americans, according to the results of the survey of 1,019 people ages 60 to 75, interviewed online, with at least $100,000 in household assets, not including their primary residences.

Only 53 percent of respondents knew it is best to wait until age 70 to claim Social Security, especially for someone with a long life expectancy.

“Many investors are puzzled,” said Dave Littell, retirement-income program director at the New York Life Center for Retirement Income at the American College.

To help educate them, Littell agreed to “open the kimono,” that is, offer a look at his own retirement plan.

Littell, 61, expects to live longer than most: His father is 103 and moved into a life-care facility in Chicago while he was still in his 80s.

“He’s been a very good teacher about preparing for the next phase of life,” Littell said. “He also lived carefully, wore seat belts, hopped into bed immediately when he got sick, and got enough rest.”
(Life-expectancy calculators, such as the one at, allow you to forecast how long you might live.)

Littell started with his asset allocation: 20 percent fixed income, 80 percent equity mutual funds in an individual retirement account, plus a small pension.

In recent years, he’s shifted out of 100 percent equities and into fixed income through annuities. “They’re not for everyone,” he acknowledged.
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“Ten years ago, my portfolio was 100 percent equity because I was still in the accumulation stage, and I have a high risk tolerance. I work as a professor, which is a stable job.”

Littell cites work by professor Moshe Molevsky that asks, “Is your job a stock or a bond?”

“If your job is more secure, it’s like a bond, so you can take more risk with your portfolio,” Littell said.

Now within five years of retirement, he’s adding income that will begin later in life.

Littell bought a deferred-income annuity that promises a lifetime payment beginning in four years. He and his partner took a rollover IRA and bought an indexed annuity with a guaranteed-income rider that provides income beginning “whenever we need it and want to begin the income — the longer the deferral, the higher the benefit.”

“I hung on to the older variable annuity that I have. Older products can have excellent annuitization rates, as they use older mortality tables and can have excellent interest-rate guarantees. I do have a small defined-benefit pension that I could take as a lump sum, but I will definitely elect the annuity as another source of retirement income,” he said.

Finally, he and his spouse are both deferring Social Security to age 70.

“I will be allowed to elect a spousal benefit from age 66 to 70, as well,” Littell said. “Over time, we will continue to take investment gains and buy additional income as long as our health remains good.”
Littell views Social Security as “the cheapest annuity out there. The cheapest way to buy more income is to defer Social Security to 70. . . . It’s the best deal in town, especially for women, because commercial annuities charge more to women, who are likely to live longer. Social Security doesn’t take that into consideration.”

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Having a written plan for retirement can lead to better decision-making and help you educate yourself as you formulate your “retirement vision.” But only one in four people surveyed had written down a plan.

Littell said he did one for himself.

“I knew that I was going to make a change. When I retire, work won’t be my number-one priority. It might be number two,” he said.

“I used to be an Olympic fencer in Seoul in 1988. I coached fencing at Haverford College from 2000 to 2006, and I gave it up because it was too hard to do and be a professor. So in retirement, I might return to that somehow.”

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