My mother is getting ready to retire in a year or two and I'm helping her navigate her investments, pension, SS and plan her long term strategy.
Her total monthly income in retirement will be about $2k
about 80% of this will come from a pension plan with COLA and SS.
The remaining 20% will come from her 457, 401k and taxable accounts.
Because 80% of her income is fixed and cost of living adjusted, I have advised her to be very aggressive with the remainder.
My advice specifically was this: Keep three years (about $15k) of needed withdrawals in a cash equivalent. Keep the rest in a midcap index or similar. Draw from your investments when the market is going up or stagnant. Draw from your cash if the market has dropped more than 10% in one year. Once the market has returned to where is was before the drop, start replenishing your cash reserves.
She keeps asking if this is too aggressive considering that she is retiring and I keep pointing out that 80% of her income is fixed, so no matter how aggressive she is with the 20% she can't be aggressive overall.
So my questions are:
Since she does need the 20% to live on, am I suggesting too aggressive a plan?
Is my advice to pull from cash when the market is down and not to replenish until the market recovers smart or a form of market timing?