I recently took a spin in the wayback machine and found this column I wrote a year ago talking about low interest rates. Not too much has changed so I thought I’d do a little edit and send it out again.

It’s funny how many of my clients remember the high interest rates of the late ’70s and early ’80s fondly. Everybody wants to remember the 7% savings accounts and the 15% CDs. Nobody wants to remember the 18% mortgages, though.

Today, we have historically low interest rates and it looks like the Fed aims to keep them low for the next few years. We’ll see. The low rates are great for homeowners but not so great for conservative investors looking for “safe” growth. And they don’t do a thing for those relying on interest income to meet their monthly expenses.

The old guideline was a 60/40 split for relatively safe investing: 60% at risk in the market, 40% in bonds. In a time with high interest rates, this was fine. Retirees could do the 60/40 split and still safely withdraw 4% from their savings each year without significantly impacting their bottom line. But with low interest rates killing bonds, what does that do for retirees looking to stick to the old rule? Do they still have the ability to withdraw up to 4% from their nest egg each year without really depleting it?

Well, good news. If your plan is to coast through a 30-year retirement and have your check to the funeral home bounce, the old guidelines should see you through. If you want to leave something after you’re gone, or genetics indicate you might have higher expenses or a longer retirement, you need to adjust to new rules.

To keep your nest egg stable or growing while you withdraw 4%, you might need to take on more risk or swap out some bond funds for a good-paying safe account. Otherwise, you may need to go to a 70/30 split instead of the old, reliable 60/40. Maybe even 80/20. Or, you can lower your annual distributions from 4% to something closer to 3%… but who wants to live on less income in retirement?

Of course, it goes without saying that everyone’s situation is different, and these guidelines are not universal. They may not apply to you. But, if you do have concerns about making your money last, give us a call at 215-657-9200 and let’s match up calendars.