Why Buy-and-Hold is a Bad Idea for Retirees

by Ken Moraif
Market Watch

Do you think you’re a long-term investor who should buy-hold through a bad market? If you are retired and drawing money from your investments, I think that’s a very dangerous idea. In fact, if you had retired 15 years ago and then followed a buy-and-hold strategy, you would now be out of money.

Let’s say you retired in January of 2000 with $1 million. Where would you be today if you took out the frequently prescribed 4% for your cost of living (adjusted for inflation) and rode the market down through the Y2K and the 2008 bears? Let’s look at the numbers.

You began your retired life with $1 million. Each year you took out 4%, or $40,000. You also had to take out 3% more each year to keep up with inflation: In Year 1, the amount you withdrew was $40,000; in Year 2, it was $41,200; in Year 3, $42,436, etc.

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