![]() Taking smaller withdrawals when the markets are down will likely make you feel less anxious about the risk of running out of money. If you panic when the markets are bad, you may be tempted to sell and lock in your losses. The reason for this is common knowledge in the investment community. In turn, this could even give you better investment performance. So, instead of taking an initial 4% and just adjusting for inflation you could take, for example, 5%. It may not seem like much, but it’s enough to matter.Īdjusting your withdrawals based on your account value may help you sleep better too. In fact, if you follow a retirement income strategy that calls for adjusting your withdrawals you can even afford a higher initial withdrawal. Adjusting your withdrawals to account for these changes will help balance your spending to keep it in line with what your portfolio can support. Inflation, interest rates, investment returns, and taxes will all vary over time. Why Should I take Variable Withdrawals from my Retirement Portfolio?Įverything that affects your portfolio will change over the course of your retirement. In addition to providing some protection from sequence risk, this strategy will help protect your portfolio from higher inflation as well. In this article I am going to explain a strategy of taking variable withdrawals from your portfolio. ![]() As I have mentioned before this is the risk that you experience poor investment returns early in retirement, which has a significant impact on your savings.įortunately, there are ways that you can protect yourself from the sequence of returns risk. When you take systematic withdrawals from your portfolio you expose yourself to the sequence of return risk. However, there is some amount of risk involved. The amount of the withdrawals and your ability to maintain that income for your lifetime are both pretty safe with this method. Doing this will provide you with a relatively stable income in retirement. ![]() One of the most popular, and basic, ways to calculate the income you can take from an investment portfolio is to withdraw a fixed percentage of the portfolio and adjust the withdrawal for inflation each year. Establishing Withdrawal Amounts for Retirement Income Retirement guardrails can help you achieve this balance in a systematic way that removes guesswork. The last part may not seem as bad, and it arguably isn’t, but it’s still something to consider. In simple language, this means that you are deciding how much income to take now, and weighing the risk of withdrawing too much and running out of money, or withdrawing too little and leaving more than you anticipated to heirs. This requires you to strike a balance between current spending and future account value to support that spending later. How much can you spend in retirement without the risk of running out of money? That is arguably the key consideration of your retirement income plan.
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