One size doesn't fit all
Variables affect how much to withdraw from retirement accounts
How much money will I be able to take out of my retirement accounts?
“When I move my 401(k) to Everence®, how do you know how much money to send me?” my clients ask. After saving for 30+ years, making the leap to withdrawing money feels like driving blind.
The most well-known way to answer is the classic 4% withdrawal rule: in the first year of retirement, calculate what 4% of your money is and that’s your steady, annual withdrawal rate (giving yourself some raises over time because of inflation).
This rule was proposed by financial advisor William Bengen in the ‘90s, using some real-world market returns and some assumed returns (bonds at 5.2%, stocks at 10.3%, and inflation at 3%). In his model, it worked well for those who have at least 75% of their money in stocks.
You can probably see gaps of this rule. Let’s say your risk tolerance is lower, you want to leave a legacy to family or nonprofits, inflation is higher, or you’re uncomfortable at the idea of your income being based on a fluctuating asset.
You don’t have to decide your withdrawal amounts alone, though. Everence financial planning can help coordinate your Social Security claiming date, which could be a hedge against running out of money early.
We can discuss whether you value flexibility or certainty more, which can point toward income annuities (like build-your-own pensions) or investments.
We can explore a charitable gift which would simultaneously give you income and earmark a gift to a nonprofit.