Attn Retirees: Are you withdrawing more than 3 percent of your income each year? If so, watch out!
Retirees have been told for almost twenty years that withdrawing up to 4 percent of their savings each year is perfectly acceptable. Advisers have long said that 4 percent was the magic number that would ensure retirees could keep up a good standard of living without running out of money during their retirement. According to a recent InvestmentNews article, however, that advice may no longer apply.
The recent financial collapse, the housing bust, and the now long-running volatility in the stock market have all called into question “standard wisdom” about how much money retirees can safely withdraw each year.
“The reason for rethinking the 4% rule is that we believe returns will likely be lower than they were over the last 75 years and that volatility will be higher,” Harold Evensky, president of Evensky & Katz Wealth Management, told InvestmentNews. “There's a strong consensus that forward-looking returns are going to be modest.”
Experts quoted in the article recommend retirees adjust the amount they’re withdrawing when the market is depressed. Factors to consider include:
- How old you are;
- What other assets you have;
- How much you’re paying in fees on your funds’; and
- Whether you’re still working in some capacity.
Additionally, retirees who have lost money in an investment scam or an investment fraud scheme may need to recalculate their withdrawals significantly because their bottom lines are going to be very different than they had planned. If you’ve been a victim of investment fraud or stockbroker misconduct and have lost money you relied on for your retirement, click here to learn what you can do to recover your investment losses.
UPDATE: New Rules to Protect Retirement Accounts in 2017
If you need help learning how to spot a scam, or if you believe you may have already lost retirement money to an investment scam, please take a moment to watch our helpful video!