The appropriate amount to withdraw from the nest egg during retirement will vary for everyone.
After spending most of your life in retirement, you will finally find yourself using your portfolio. However, this movement can be scary. What would you do if you run out of money? What if you use it too much or too little?
The answer ultimately depends on how much you saved, and your particular lifestyle and spending habits. However, experts have some go-to rules. So let’s take a look.
4% rule
This rule suggests that you withdraw 4% of your portfolio in the first year of retirement. Then, the next year, we extract 4% and inflation rate. It’s a rather simple strategy. But it can make your portfolio a threat during the down market. However, many experts argue that this strategy will help you grow your portfolio for at least 30 years. This is why experts recommend taking inflation and market conditions into consideration when exercising this rule.
Fixed Dollar withdrawal strategy
This strategy involves withdrawing a fixed amount each year upon retirement. So it’s similar to the 4% rule, but can be risky as it doesn’t adapt to inflation. This is perfect for those who expect to spend a relatively fixed amount each year on retirement without any further need. But it is also heavily affected by market conditions and can run out of money in the down market.
Retreat “Bucket”
A withdrawal “bucket” strategy will be introduced. This strategy divides retirement savings into three buckets: short-term, medium-term and long-term.
