My blog has moved! Redirecting…

You should be automatically redirected. If not, visit and update your bookmarks.

Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Monday, August 07, 2006

The Risk of High Withdrawal Rates

When you consider your retirement savings you need to forecast the withdrawal rate. You need to look at the portfolio mix, how long you plan to withdrawal from the portfolio, how much risk you want to take on, and spending patterns.

At retirement a 50% stock and 50% bond portfolio is not uncommon. Let's say your retirement savings is $500,000 and you retired on December 31, 1972. Obviously, the higher the withdrawal rate the greater the chance of potential shortfall. If you took out 9% you would be out in 1981 and 1982 if you took out 8%. But as the withdrawal rate drops the longer your money lasts. At 7% withdrawal rate you would reach 1984. At 6% you last almost to 1988. Finally at 5% you last until 1994.

So by examing this you can tell how much you will have and for how long.


Post a Comment

<< Home