The right amount to withdraw from nest eggs throughout retirement would be different for everyone.
After spending most of your life saving for retirement, you’ll find yourself finally using your portfolio. But the move could be a scary one. What if you run out of money? What if you spend too much or too little?
The answers ultimately depend on how much you’ve saved and your specific lifestyle and spending habits. But experts do have some go-to rules. So let’s take a look.
4 Percent Rule
This rule suggests you withdraw 4 percent of your portfolio during the first year in retirement. Then, you withdraw 4 percent plus the rate of inflation in the next years. It’s a rather simple strategy. But it can put your portfolio in threat during down markets. However, many experts claim this strategy can help stretch your portfolio for at least 30 years. This is why experts recommend you take inflation and market conditions into account when exercising this rule.
Fixed-Dollar Withdrawal Strategy
This strategy involves withdrawing a fixed amount of money each year in retirement. So it is similar to the 4 percent rule, but may be riskier because it doesn’t adjust to inflation. It’s best for people who expect to spend a relatively fixed amount each year in retirement without needing any more. But it is also highly impacted by market conditions—and you could run out of money in down markets.
Withdrawal ‘Buckets’
The withdrawal “buckets” strategy comes into play. This strategy divides your retirement savings into three buckets: short term, intermediate term, and long term.
