By Scott Burns

Q. Much has been made about how a million dollars saved for retirement is not what it used to be. It is often said that with safe withdrawal rates of three to four percent, you will have to stretch your money to live well in your later years. What I don't seem to get is this: If you have no children and just your partner to take care of so you don't need any left at the end, can't you just spend the money down faster?

Take a million in savings. Even if you had investment returns of only 3 percent per year on average, and you took out $50,000 per year starting at age 62, would that not last more than 30 years before the amount ran out? Considering that no male in my family has made it past 70 due to health issues, this seems safe to me. I also believe that I will need less at age 80 plus even if I make it that far. What am I missing here? —M.H., by email

A. The only thing you are missing is the destructive interaction of uncertain investment returns, inflation and uncertain longevity. In theory you could search for, and buy, an inflation adjusted joint life annuity and it might provide you and your partner with an income of constant purchasing power until both of you had died. But inflation adjusted life annuities are rare and most people are reluctant to hand over their life savings in exchange for a monthly income, even if it is inflation adjusted.

Failing the life annuity route we are left with trying to extract a rising annual payment from an investment portfolio that can suffer significant fluctuations in value. If the annual payment exceeds the dividend and interest generated by the portfolio, it is necessary to sell a portion of the portfolio, whatever the market price of the assets. Do that in a bear market— as happened to those who retired in 2000 or 2008— and you increase the odds that your money won’t last as long as you do. Worse, the higher your initial withdrawal as a percentage of portfolio value, the lower the odds your savings will last through 20, 25 or 30 years.

There are three under-appreciated realities that reduce this danger. You mentioned one of them— the virtual certainty that our appetite for consumption will decline as we age, particularly after reaching our 70s. A second under-appreciated reality is that in a couple, one will generally die well before the other. In a typical mid-sixties couple, for instance, actuaries will tell us that both will be alive for about 15 years and the survivor will live on, alone, for another 10 years. When that happens, living expenses decline.

The final under-appreciated reality is that across the entire population, there is only a 10 percent chance that a 65 year old will live to age 95. That’s a pretty good argument to relax and, maybe, spend a bit more.

Q. I'm an avid dividend investor. My small IRA has $65,000 in dividend paying stocks that currently produce $3,000 annually, which I immediately reinvest. I have a few blue chip stocks like Coca Cola and McDonalds, a few utilities, and I've expanded into MLP's and REITs. My plan is to continue on this path for the next 20 years and grow my dividends to $25,000 annually at which time I will begin taking the dividends in cash and drawing Social Security at age 67.

Is this a realistic plan? — K.D., Plano, TX

A. You could do a lot worse. Regular reinvestment of dividends is a great way to build your portfolio through thick and thin. Many investors in the 1970s, for instance, bought electric utilities with automatic dividend reinvestment plans. Over the decade their investment grew significantly and continued to rise in the bull market of the 1980s.

The biggest liability here is that you are buying two levels of inadequate diversification. This can happen when you fall in love with a small number of high-yield stocks and end up with much of your portfolio in one or two companies. Those stocks can turn into disasters and have major dividend cuts. (Think GE or, worse, Bank of America.)

It can also happen simply by having a preference for dividend stocks. If you put a minimum yield requirement on the portfolio you will inevitably have a major concentration in REITs and utilities. That isn’t healthy.