If you're aiming for a financially secure future, saving up for retirement is a must-do. Once that's crossed, you need to make wise decisions regarding your money and how to withdraw it. According to the Ubiquity Retirement & Savings' VP of HR, brand & culture Andrew Meadows, you don't need a plan just to save the retirement cash but also for how you withdraw it. As the experts put it, if you have a long retirement period, you can easily stretch your dollars by applying the various rretirement distributions strategies at your disposal. The factors you need to take into consideration include the account holder's longetivity, tax rates, and present market conditions.
Let's look at at two retirement distribution strategies you can put to good use:
- The 4% Rule
Many people use this rule as a guide to stretch their retirement savings, and credit for it all goes to financial advisor William Bengen. The basic tenant of the 4% rule entails withdrawing the said percentage in the first year of retirement, after which the withdrawal rate is adjusted every year for inflation so that the money can sustain a 3-decade duration. Bengen introduced this rule nearly 25 years ago, and no matter the results it has reaped, experts advise people to not be too glued to it.
- Take Fixed Dollar Withdrawals
One more rule to stick by is withdrawing fixed dollar amounts. Remember that your retirement account is not your piggy bank and neither is it a pot of gold that will keep providing. The money in it can easily run out so only withdraw when it is essential. Moreover, a wiser approach entails withdrawing a specific amount every month, bi-yearly, or yearly. These systematic withdrawals will help keep a balance to your savings and ensure you don't spend it all in the first couple of months. Think of it as a salary if you must.
Wrapping It Up
While both of these methods are excellent strategies to stretch your retirement dollars, financial expert suggest that you consult an advisor who can suggest the perfect blend of retirement withdrawal strategies available. For your knowledge, apart from the ones listed above, these include: limiting withdrawals to income, bucketing your money, total return approach, minimizing mandatory distributions, creating a floor, and using account sequencing.