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Helping Make Your Retirement Savings Last

Making the most of your retirement years also means making the most of the money you’ve saved. That relaxed, comfortable retirement you have always dreamed about often depends on these two simple facts:
• The amount of money you’ve saved
• How quickly you spend that nest egg after you retire

The rate of annual withdrawals from personal savings and investments helps  determine how long your assets will last and whether those assets may be able to generate a sustainable stream of income over the course of retirement.

A number of factors will influence your choice of annual withdrawal rate. Here are three key considerations.

Your Age and Health

As you think about what your withdrawal rate should be, begin by considering your age and health. Although you can’t predict for certain how long you will live, you can make an estimate.  However, it may not be wise to base your estimate on the average life expectancy for your age and sex, particularly if you are healthy. The average life expectancy has risen steadily in the United States, reaching 78.2 years in 2017 according to the Center for Disease Control and Prevention.


Inflation is the tendency for prices to increase over time. Keep in mind that inflation not only raises the future cost of goods and services, but also affects the value of assets set aside to meet those costs. To account for the impact of inflation, include an annual percentage increase in your retirement income.

How much inflation should you plan for? Although the rate varies from year to year, for long-term planning purposes, you may want to assume that inflation would average in the range of 3% to 4% a year. If, however, inflation flares up after you have retired, you may need to adjust your withdrawal rate to reflect the impact of higher inflation on both your expenses and investment returns. Also, once you retire you should assess your investment portfolio regularly to ensure that it continues to generate income that will at least keep pace with inflation.

Variability of Investment Returns

When considering how much your investments may earn over the course of your retirement, you might think you could base assumptions on historical stock market averages, as you may have done when projecting how many years you needed to reach your retirement savings goal. But once you start taking income from your  portfolio, you no longer have the luxury of time to recover from possible market losses, as retirees and nearretirees during this latest market downturn have experienced firsthand.

When a retiree’s need for annual withdrawals is added to poor performance,
the result can be a much earlier depletion of assets than would have occurred if the portfolio returns had increased steadily. While it’s possible that your portfolio will not experience any losses and will even grow to generate more income than you expected, it’s safer to assume some setbacks will occur.

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