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Submitted by: Amy Rose Herrick
Amy's skills combine Tax Planning, Income structuring, Cash Flow, Divorce Settlements, Debt configuration, Estate Plans, Portfolio Planning and Distribution Alternatives. She assisted an institutional investor base from '86-90, then focused her practice in '91 to the present for individuals and small business exclusively. Amy holds various professional licensing in several states. She has provided planning advice to multiple media outlets including Newsweek. Interviews are available.
How much money you withdraw from your savings and investment portfolio at any age and how those assets are invested will have a direct bearing on how long your assets will last.
Let’s keep it simple. You retire at age 65. You have a portfolio of 50% bonds and 50% stocks. According to historical returns with only a 5% annual withdrawal rate, the account will last you 21 years to your age 86.
Increase the withdrawal rate only slightly to 6% annually and the money will last you only 14 years and 11 months to age 79.
At a 7% withdrawal rate the account is empty in 11 years and 8 months, age 76.
It will only take 9 years and 11 months if you start out with an 8% annual withdrawal rate, age 74.
The data continues to get worst the higher the initial withdrawal rate is. With a 9% withdrawal rate, just 4% more than the first example, not even double, your retirement nest egg is exhausted in a mere 8 years and 10 months, age 73.
Even small differences in withdrawal rates will determine if you are choosing to outlive your assets. Something you need to control early in your retirement planning process with a trained professional distribution specialist.
An important note for couples: If you have both attained age 65 at retirement, the probability at least one of you will live to age 85 is 84%. Plan accordingly!
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