Saturday, January 30, 2016

withdrawing in retirement

We did the math—looking at history and simulating many potential outcomes—and landed on this guideline: Aim to withdraw no more than 4%–5% from your savings each year to be confident you can enjoy your someday through 20–30 years of retirement.

We went back and looked at what would have happened with a hypothetical person’s 28-year retirement, basing our calculations on the first day of each month, beginning with January 1, 1926. In 90% of those retirement periods, a balanced portfolio (50% stocks, 40% bonds, and 10% cash) with a 4% withdrawal rate would have lasted for at least 32 years, and a 5% withdrawal rate would have lasted for at least 22 years. This means that even with market ups and downs, these withdrawal amounts worked most of the time—assuming the investors stuck to this balanced investment plan.

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