"The gap ratio is the single number that determines whether your retirement works or quietly falls apart in year 12. It measures the percentage of your monthly spending that your portfolio has to cover after Social Security and any pension kick in."
"Retiree A has a gap ratio of 60%, needing $3,300 per month from their portfolio, while Retiree B has a gap ratio of 15.5%, needing only $900 per month. Guaranteed income does the heavy lifting."
"The gap ratio captures sequence-of-returns risk in one figure. When a portfolio funds most of your spending, a bad first decade of returns is permanent damage."
Most pre-retirees focus on the age to retire rather than the gap ratio, which is crucial for retirement success. The gap ratio measures the percentage of monthly expenses that a portfolio must cover after Social Security and pensions. For example, Retiree A has a higher portfolio but a gap ratio of 60%, while Retiree B has a lower portfolio and a gap ratio of 15.5%. Guaranteed income significantly reduces risk, making it essential for financial stability in retirement.
Read at 24/7 Wall St.
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