Be careful about illustrations. This chart looks safe enough, but take a second look. Does this Exhibit A  look familiar? This chart shows a continuous withdrawal amount for a 20 year retirement period. The investment grows at 10% per year.   However, in the real world these types of returns depend on the products you use. If you are planning on holding mutual funds alone,  your portfolio values may fluctuate from year to year. Diversification may help but it is no guarantee.

Take a look at this Exhibit B. This illustration shows a portfolio with different rates of returns over the same period. This account runs out to money by the 10th year because the rate of return fluctuates from year to year and experiences negative returns in retirement, which  happens in the real world. In this illustration the withdrawal amount is not been adjusted for a decline of the portfolio value. What’s interesting to note is that the overall rate of return on this exhibit is over 10%.

Exhibit C illustrates what can happen if you have other resources available to you during those periods when the market is providing negative returns. When considering this type of strategy we suggest that you discuss it with your adviser, because it may not be available to you.