Trying to figure out how much of their savings to withdraw each year perplexes many retirees. A Vanguard research paper looked at the problem and recommended a hybrid approach that mixes two common methods of calculating spending.
The two traditional strategies rely on withdrawing a fixed percentage of a portfolio each year. Vanguard's analysis found long-term problems with each method.
The paper first looked at the so-called 4 percent rule. A retiree using this strategy would withdraw that percentage of the amount in their retirement funds at the beginning of each year. Because a portfolio's assets would rise and fall with the markets, this strategy makes it difficult to plan spending. The upside to this method is that assets would never be depleted.
Continue Reading for Free
Register and gain access to:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.