Hello;
In retirement, it’s time to start spending. But how much can you withdraw each year without needing to worry about running out of money? 1 (How can I make my retirement savings last? Fidelity Viewpoints Apr. ’24)
What is a sustainable withdrawal rate (SWR)?
- SWR is the estimated percentage of savings you’re able to withdraw each year throughout retirement without running out of money.
- Looking at history and simulating many potential outcomes, aim to withdraw no more than 4% to 5% of your savings in the first year of retirement.
What will impact my sustainable withdrawal rate?
- It will be based on many things such as 1) how long you live 2) inflation 3) returns of the stock market 4) your age 5) investments you choose and 6) taxes
- A weak market early in retirement can diminish your nest egg. On the other hand, a strong stock market early in retirement can put the wind at your back
- Say you plan on a retirement of 30 years, you invest in a balanced portfolio and want a high level of confidence you won’t run out of money. Research indicates that a 4.6% withdrawal rate would have been sustainable 90% of the time
- On the other hand, if you are retiring at age 60, you may want to plan for a 35-year retirement. In that case, 4.4% was the most you could withdraw for a plan that worked 90% of the historical periods.
- How you invest can be important. Portfolios with more stocks have historically provided more growth over the long-term – but have also experienced bigger price swings.
Takeaways
- Planning for withdrawals in retirement can be challenging
- Estimate how long you think you will live based on your health.
- Evaluate how much investment risk you can live with
- Choose an appropriate mix of investments
- Choose a withdrawal rate you believe has a good chance of success
Sincerely,
Mike Busby (2-Dec-24)
THE COMMENTS CONTAINED HEREIN ARE A GENERAL DISCUSSION OF CERTAIN ISSUES INTENDED AS GENERAL INFORMATION ONLY AND SHOULD NOT BE RELIED UPON AS TAX OR LEGAL ADVICE. PLEASE OBTAIN INDEPENDENT PROFESSIONAL ADVICE, IN THE CONTEXT OF YOUR PARTICULAR CIRCUMSTANCES. THIS ARTICLE WAS WRITTEN, DESIGNED AND PRODUCED BY MIKE BUSBY FOR THE BENEFIT OF MIKE BUSBY WHO IS A FINANACIAL ADVISOR FOR BRANDON LINDSAY INSURANCE AGENCIES, A TRADE NAME REGISTERED WITH INVESTIA FINANCIAL SERVICES INC., AND DOES NOT NECESSARILY REFLECT THE OPINION OF INVESTIA. THE INFORMATION CONTAINED IN THIS ARTICLE COMES FROM SOURCES WE BELIEVE RELIABLE, BUT WE CANNOT GUARANTEE ITS ACCURACY OR RELIABILTY. THE OPINIONS EXPRESSED ARE BASED ON AN ANALYSIS AND INTERPRETATION DATING FROM THE DATE OF PUBLICATION AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. FURTHERMORE, THEY DO NOT CONSTITUTE AN OFFER OR SOLICITATION TO BUY OR SELL ANY SECURITIES. MUTUAL FUNDS OFFERED THROUGH INVESTIA FINANCIAL SERVICES INC.
