Retired at Last...

Retirement planning doesn’t end once you retire. Like any financial plan, it requires periodic adjusting.

Two of the first and most important decisions are how much to withdraw annually from your nest egg, and what accounts to withdraw from.

Considerable research in recent years has concluded that retirees should be more conservative than once thought in how much they withdraw. Retirees used to routinely withdraw from their nest egg six to eight percent or more a year, adjusted for inflation. Now, say some experts, withdrawal rates should be around four or five percent in order to ensure that you don’t run out of money due to periodic market declines.

Retirees who withdraw at higher rates should be prepared to immediately cut back should their accounts suffer from a significant market downturn, or should their personal circumstances change for the worse.

From which accounts?
The general advice is to first use taxable investments in order for assets in retirement accounts to continue to grow tax deferred. But this approach isn’t always appropriate. For example, if your taxable investments are mostly bonds and your tax-deferred accounts mostly stock, withdrawing only the bonds first would make your overall portfolio riskier by becoming stock heavy.