Stanford Study Uncovers the "Best" Retirement Strategy

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About the author: Chris Abts is the President & founder of Cornerstone based in Reno, NV.  He helps people to better manage their wealth so they can focus more of their time on what truly brings meaning and fulfillment to their life.  Abts is also a best-selling author and TV show host of Redefining Retirement, which airs every Sunday evening at 5:30pm on KTVN Channel 2.

Choosing the right strategy for your retirement is not an easy task.  Millions of boomers are faced with the challenging decision of how to ensure their financial security during this next phase of their life, coupled with the fact that pensions continue to disappear while the typical retirement lasts somewhere between 20 to 30 years.

The Stanford Center for Longevity recently released a study that analyzed 292 different retirement strategies and concluded that the best approach to creating income in retirement is to delay starting Social Security benefits until age 70 and invest the retirement savings into a low cost index fund and then use the IRS’ Required Minimum Distribution Table to determine the annual withdrawal amount, which is 3.65% at age 70, increases to 5.35% at age 80, and reaches 8.77% by age 90.

However, if one plans to retire at an earlier age, the study recommends using funds held in a “Transition Bucket” to meet all income needs until the retiree reaches age 70.  When used correctly, the transition bucket should hold sufficient cash or cash equivalent to meet the income needs during this time frame. 

Stanford Study Uncovers the "Best" Retirement Strategy

As a side note, while it is true that delaying Social Security benefits is not appropriated for everyone, it is important to understand that married couples will typically benefit from using a combination of strategies that were not addressed in this study.  By registering at SSA.gov/myaccount, you can review your benefits and check for any errors. 

While I am delighted to see yet another study touting the advantages of delaying Social Security benefits, along with taking conservative withdrawals from a simple portfolio of low cost index funds, the fact is, this study has not provided us with any information that we didn’t already know.  At Cornerstone, as a fiduciary based investment advisory firm, we have been preaching these strategies to our clients for many years.

My first concern is related to well-intentioned investors choosing to invest a large portion of their retirement savings into the markets at today’s valuations, while focusing on the returns that could potentially be generated by this so-called “simple portfolio”.  Based on my 26 years of experience helping people to invest wisely, I believe one of the most important facets of a proper retirement plan should be to manage risk.  Namely, the risk embedded in the specific investments inside the portfolio, how each investment correlates with the other holdings, the negative impact of a market correction, and how this potential loss would impact the short and long term income needs of the particular retiree.  This is exactly what we’ll be addressing on Redefining Retirement this coming Sunday at 5:30pm on KTVN Channel 2.

My second concern is that while the study states that tax savings is not important for the middle class, in my experience, I have found that how retirees structure their withdrawals from their different income sources, such as Social Security benefits, tax-deferred retirement accounts, and after-tax accounts, can have a dramatic impact on their income tax liability.  For example, drawing on tax-deferred retirement funds during the early retirement phase, when structured properly, can result in a significant reduction in income taxation during retirement.

With that said, the study is a great read for anyone planning to retire within the next five years and is a great way to frame some of the more important discussion points that need to be addressed when developing an effective retirement plan to ensure that one’s retirement years result in living their best life!


Based in Reno, NV, Cornerstone is for individuals and families looking to create and grow wealth, protect and preserve their life savings, and plan for the distribution of their estate in a tax-efficient manner through a tailored strategy. Schedule a time to discuss your financial goals with us.

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