In today’s economic environment, there are many reasons you might be tempted to withdraw money from your retirement accounts before you retire, and there’s some question about how much you can safely withdraw per year after you retire. For potential homebuyers in the 55+ market, the answers to these questions can make a difference in what type of home you end up buying – or at least the price point you determine is appropriate for your current and future income.
Equifax Personal Finance blog recently posted an article by investment expert Don Solin discussing withdrawals from retirement funds. “
Running Out of Money: Retirement Withdrawal Strategies in a Low-Interest Rate Environment” begins with a discussion of the types of investments you should maintain in your portfolio.
Solin says to invest in bond funds that mature in five years or less to protect the fixed-income portion of your investment portfolio. This way, the bonds will mature as interest rates rise with inflation (which is bound to happen), and you won’t be stuck with low interest rates on your bonds forever. Solin even gives the names of specific bond index funds to consider. Overall, he says that getting the right portfolio mix is vital before you even think about withdrawing funds.
After that, Solin quotes financial author Will Bernstein on rules of thumb for withdrawing. It’s best if you can withdraw only 2 percent per year, and 3 percent will probably be okay. Bernstein has determined that retirees who live on 5 percent of their retirement savings each year and live into their 90s have a 50-50 shot at having money to spend throughout their lives.
Of course, Solin’s analysis is much more in-depth than presented here. Visit the
Equifax Personal Finance blog for more details and to ask questions of the author.