How long will my money last?BY Robert Graham
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How much money will I have when I retire?
Checkout our calculator for retirement income and projecting your nest egg.
What’s the 4% safe withdrawal rule?
This rule specifies that based on historical market results, it’s safe to withdrawal 4% of your total retirement savings every year without risk of depleting the funds as long as you keep it invested in the market. This would have worked even in the Great Depression.
Our calculators generally use 4% as the rule of thumb for how much retirement income and amount of retirement savings will generate. You might want to have a lower rate for a more conservative projection (probably not). More likely, you may tinker with a higher rate depending on how many retirement years you are looking to fund.
Those choices also depend on whether you want to leave behind money or spend what you’ve accumulated on the way out. If you’re already 90, you probably don’t need to project 35 years of retirement ahead. If you’re 60 you may well want 35 years or more depending on health, history, and other factors.
What is a dynamic withdrawal strategy?
This is a method of pulling out money in retirement that folks use to smooth out depleting the funds when the market is highly volatile. You pull out more money in good years and less money in bad years.
The calculators don’t use a strategy like this because we can’t project what the market returns might be in a future year or series of years.
It’s most useful to match some desired spending pattern changes. The 4% rule is inflexible and won’t work for everyone or every retirement runway. You may want to take a European vacation in retirement, but wait for the one year in the next five that the market returns are high to make the withdrawals.
Dynamic strategies are many and can be very complex. It’s important to proceed carefully and with clarity about how these choices affect your future. One major difference for dynamic withdrawal strategies: tax implications on annual income.