Most people don’t know what to do about retirement savings withdrawals. This proposal aims to fix that.
You probably think that many Americans fear running out of money in retirement due to a lack of savings. While that’s undoubtedly true, there’s another reason for this worry: Many don’t know how to determine how much of their retirement funds they can afford to withdraw each year.
As they wrote in their report, “Choosing the best way to convert retirement savings into a stream of income is one of the most complex financial decisions individuals have to make.” A pooled managed payout fund is a diversified, professionally managed pool of investments designed to pay out a relatively consistent level of annual income in retirement through monthly or quarterly cash distributions. The income isn’t guaranteed, but the fund is designed to reduce losses through consistent investment returns and maybe some growth over time.
A fund setting aside about 10% of the money in the managed payout fund for withdrawals to cover emergencies or other special purposes. The Brookings researchers note in their report that JP Morgan Chase Institute studies show that older households are “more likely to have extraordinary expenditures for health care, auto repair, and taxes than younger families.
What’s happening in other countries John and his colleagues note that versions of their idea exist in other parts of the world or are being considered.
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