Today I’d like to continue with this video series, which is “Ten Financial Commandments for Retirees.”
And Commandment # 5 is to Determine your safe withdrawal rate: A safe withdrawal rate is the percentage that retirees can withdraw from their accounts each year without running out of money before reaching the end of their lives. This is a key aspect in determining how long you can maintain your lifestyle. A popular guideline is the 4% rule, which suggests that an individual can withdraw 4% of their total portfolio value annually to sustain their lifestyle without running out of money.
One important factor when determining your safe withdrawal rate is your expected lifestyle in retirement. It’s also important to consider any legacy goals. How much money you’d like to leave to your children or charity will directly impact how much money you can withdraw each year from your nest egg. Failure to determine your safe withdrawal rate can have devastating financial consequences.