This includes all switches, systematic withdrawals
and systematic transfers.
If there were such a thing as a "default" income planning strategy, systematic withdrawals
might be it.
And those with defined contribution plans usually elect to receive lump sum distributions or take systematic withdrawals
rather than convert their payouts to annuities.
For example, as the authors of The 4 Percent Rule Is Not Safe in a Low-Yield World point out in their 2013 Journal of Financial Planning paper, in today's current bond market environment, the legitimacy of the 4 percent initial withdrawal strategy for retirement income "may be a historical anomaly, and clients may wish to consider their retirement income strategies more broadly than relying solely on systematic withdrawals
from a volatile portfolio.
The report identifies annuities and systematic withdrawals
as retirement income generators to consider, as they produce higher amounts of retirement income than simply investment income.
The client takes systematic withdrawals
from the asset, pays applicable income tax, and gifts the after-tax proceeds to an ILIT, which purchases life insurance on the client.
The American Benefits Council has weighed in on the topic, asserting lifetime income products are important tools for participants, but that most retiring employees generally don't select lifetime income options like annuities, guaranteed minimum withdrawal products, systematic withdrawals
and longevity insurance.
There is also the choice of making systematic withdrawals
, which the annuitant can start or stop as needs change.
Pang and Warshawsky (2009) compared different withdrawal strategies including systematic withdrawals
from mutual funds, a fixed immediate life annuity, a variable immediate life annuity, a variable deferred annuity plus guaranteed minimum withdrawal benefits, and a mix of mutual funds and a number of life annuities gradually purchased over time.
For income planning, a comprehensive client management system is a necessity in tracking ongoing and anticipated distributions such as monthly systematic withdrawals
and annual RMDs as well as the tax withholdings on these distributions.
Individuals can also make systematic withdrawals
from IRA accounts at age 59.
made over an investor's life expectancy are available, with taxable appreciation and return of original contribution recognized on a pro rata basis under Sec.