One of the biggest fears retirees commonly face is running out of money.
After decades of saving and investing, the last thing anyone wants is to watch their retirement savings shrink before their eyes
That’s why it’s important to have a well-thought-out withdrawal strategy. But the strategy a lot of retirees use to manage their savings misses the mark on one key point. And if you stick to a common rule, you may be at a greater risk of depleting your nest egg in your lifetime.
Why fixed retirement plan withdrawals can create problems A lot of people take the following approach to withdrawing from an IRA or 401(k): – Establish an initial withdrawal rate (often 4%, though that’s just one guideline). – Adjust that withdrawal for inflation annually. – Stick to that plan through thick and thin. The problem is that this strategy becomes risky when markets don’t cooperate — especially if there’s a market downturn early on in retirement. If your portfolio loses a fair amount of value but you continue withdrawing at the same rate without making adjustments, you’ll have fewer assets left to recover when the market rebounds.