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Withdrawing Money in Retirement

T Benner
Thomas W. Benner, MBA, CFP®
Vice President, Wealth Advisor
(585) 419-0670 x50689

If you’ve done the tough work of accumulating savings, you may be wondering how much can be safely withdrawn each year without running out of money in your lifetime. This is important to know since some folks hate to take any money from retirement accounts, fearing there won’t be enough for later years. But being that strict with yourself is not necessary. On the other hand, someone retiring in their 60’s might very well live until age 95 and we’d want to make sure the balance is not eroded too soon.

“The 4% Rule”

As a starting point, a good rule of thumb is 4% of your total retirement portfolio can be withdrawn the first year you take distributions and the balance will last over 30 years. For example, with $250,000 you can withdraw $10,000 initially.

However, this “4% rule” is loaded with assumptions. Below are a few of the most important ones:

  • If you’re younger than 65, the withdrawal percentage should be lower so the balance lasts for a longer expected lifetime. If you’re older, the percentage can be higher.
  • You must maintain a well-diversified and regularly rebalanced investment portfolio, with approximately 60% allocated to stocks. The market will go up and down through the years but you must stay the course with this allocation.
  • The dollar amount withdrawn can increase each year with inflation, but only when the market has gone up. Otherwise, take out the same amount as the previous year. 

How We Can Help

We have extensively stress tested this withdrawal strategy and it has held up quite well even using the worst historical periods of stock market returns. Advanced methods are available for more complicated scenarios, but this approach will do just fine for most folks. Please contact me with any questions you have at (585) 419-0670.

This material is provided for general information purposes only. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust or its affiliates, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.