How Retirees Can Spend Enough, but Not Too Much

Soccer City
How Retirees Can Spend Enough, but Not Too Much
When you retire, you’ll probably want to visit your grandchildren more than once each year. Perhaps you’ll aim to give money each month to charity or your religious congregation.
The amount you have saved will clearly matter a great deal in whether you can do these things. But so will your portfolio withdrawal rate — the percentage of your assets that you take out each year to pay your expenses. You want it to be high enough to afford fun and generosity but low enough that you have little risk of running out of money.

Until a few years ago, the standard advice was that 4 percent or 4.5 percent was about the best you could do. So if you had $500,000 in savings, 4 percent would give you about $20,000 in your first year of retirement to augment Social Security and any other income. Then, you could give yourself a raise each year based on inflation. At 3 percent inflation, you’d end up with $20,600 in the second year of retirement and so on from there.

More recently, however, several studies have suggested that withdrawing 5 percent or even 6 percent was possible — and still prudent.

Retirees rejoiced.

source: nytimes

Tweet