FINANCIAL EXPERTS often suggest retirees use a 4% portfolio withdrawal rate. For instance, if you retire with $400,000 in savings, that would mean $16,000 in pretax first-year portfolio income. You might be able to generate that income by purchasing a collection of bonds that yield 4%. Problem is, the bonds may be from financially weak issuers and hence there’s a risk of default, plus you would leave yourself vulnerable to inflation, which will reduce the purchasing power of your bond interest with every passing year.

STOCKS WERE A GREAT investment over the past century, but miserable performers between early 2000 and early 2009. What can we expect in future? Nobody knows. But for stock investors, there’s reason for both optimism and caution.
Stocks are riskier than bonds, so they should be priced to deliver higher returns. When you buy a stock, you become an owner, with the prospect of endless gains if things go well and the possibility of losing everything if they don’t.

WHEN WE DISCUSS investment performance, we typically talk about nominal returns. But as an investor looking to increase your wealth, what you should care about are real returns, which are your results over and above inflation.
Lower inflation is typically good for investors, because it’s a sign of economic stability—an environment where financial markets tend to flourish. Folks are also less likely to notch investment gains, only to discover that those gains are matched by inflation,

DAY TO DAY, STOCK prices are driven by the latest news—government data, corporate announcements, political developments, you name it—which is why it’s so hard to forecast short-term performance. But in theory, over the long term, the key driver of stock returns should be economic growth.
Consider early 1975 to early 2025. During this 50-year stretch, nominal U.S. economic growth (which includes inflation) averaged 6% a year, per-share profits for the companies in the S&P 500-stock index rose 6.7% and the S&P 500-index climbed 8.8%.

REAL GROSS DOMESTIC—meaning growth adjusted for inflation—climbed 3.6% a year over the 50 years through early 2000, according to data from the U.S. Department of Commerce’s Bureau of Economic Analysis. But over the 25 years that followed,  real GDP grew at just 2.1% a year.
The big question: Are there structural impediments that are restraining economic growth, and do those impediments mean we won’t regularly notch the 1950-2000 average of 3.6% a year?

REAL ECONOMIC GROWTH is driven by increasing the number of workers and by raising their productivity. The latter is the reason innovation is so important. If productivity rises, we increase GDP per capita, which means the standard of living for the average American ought to rise. Over the past 50 years, roughly half of the annual growth in real GDP has come from productivity gains and half from increases in the working population.
GDP growth should,

WHERE WILL YOUR retirement income come from? You will likely rely on some combination of six key sources, each of which will be discussed in the sections that follow:
Savings. You will want to think carefully about how you’ll extract income from your portfolio—and how much you can safely withdraw each year. To get a quick check on your plan, try Vanguard Group’s retirement income calculator.
Social Security. When should you claim Social Security?

WHILE YOU HAD A JOB, it might have been unnerving when the stock market declined. But there was no immediate impact on your standard of living. You had a paycheck to cover your daily living expenses, so it wasn’t like you needed to sell stocks to buy groceries.
In fact, a market decline represented an opportunity. You could funnel part of your paycheck into stocks, thus taking advantage of the lower prices. Want to amass a healthy retirement nest egg?

SHORT-TERM MARKET declines get all the attention. But long-run inflation can prove far more threatening to retirees. Consider the damage that even modest inflation can inflict. Suppose annual inflation runs at 2.5% during a retirement that lasts 30 years. By the end of three decades, the purchasing power of $1 would be reduced to 48 cents.
Moreover, CPI-U—the most popular inflation measure—may underestimate how much seniors are affected by rising prices. The Bureau of Labor Statistics has a separate measure,

WHAT IS RETIREMENT’S biggest financial risk? Simply put, you don’t want to run out of money before you run out of breath. Therein lies the great conundrum: You don’t know how long you’ll need to make your savings last.
To get a handle on the issue, forget looking at life expectancies as of birth. Those are dragged down by all the folks who die before reaching retirement age. Instead, you might consider life expectancies as of age 65.

IF YOU NEED A LOAN, tapping into your home’s value can be one of the cheaper options. The interest rate will tend to be low, because the loan is secured by your house. Be warned: The interest on home equity loans is no longer tax-deductible, thanks to 2017’s tax law, unless the loan is used to buy, build or substantially improve a first or second home.
What sort of loan should you take out?

SUPPOSE YOU HAVE little or nothing saved for retirement. What to do? You might focus on one overriding goal: not claiming Social Security retirement benefits until age 70.
Social Security is a wonderful income stream: It’s government guaranteed, at least partly tax-free, it rises every year with inflation, you get it for as long as you live and your spouse may receive your benefit as a survivor benefit. By delaying until age 70, you ensure that you will get the maximum possible monthly benefit.

DOESN’T LOOK LIKE you’ll have enough saved for retirement? Here’s how you could get back on track:

Save like crazy. You might take advantage of catch-up contributions to 401(k) plans, IRAs and health savings accounts. This can allow you to sock away thousands of dollars more each year on a tax-favored basis.
Slash your expenses. Get all debts paid off. Trade down to a smaller home now rather than waiting for retirement.
Delay retirement.

IF YOU TAKE EARLY retirement, there are three key issues you need to worry about. First, and most important, do you have enough saved? In this part of the guide, we talk about a 4% portfolio withdrawal rate. But if you’re quitting the workforce in your 50s, you might play it a little safer and assume not a 4% withdrawal rate, but 3% instead.
Second, if you retire before age 59½, you could potentially face tax penalties if you tap your retirement accounts.

THINK ABOUT HOW much you spend during a one-week vacation. Now, imagine being on vacation 52 weeks a year. The implication: You’ll likely find ample opportunities to spend whatever retirement income you have.
Your ability to splurge on travel, entertainment and eating out will depend not only on your after-tax income, but also on how much of that income gets chewed up by fixed costs, so you might take a shot at estimating what those will be.