Finding the Right Withdrawal Rate: One Key to Portfolio Sustainability
Like all investors, individuals who are living off of their retirement savings need a blueprint to construct a successful portfolio.
But the blueprint that works for the typical investor who is saving for retirement won’t work for those who are living off of their retirement savings.
In this article
- Your Withdrawal Approach
- Withdrawal Rate Clarification
- Adapting the Approach to the Real World
- Withdrawal “Success Rates”
- More Recent Studies
- The Bottom Line: Realistic Withdrawal Rates
- The Withdrawal Rate Approach
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That’s because the goals of these two types of investors are not quite the same.
All investors want maximum returns on their savings. But those living off of their retirement savings are also “savings consumers” who use their savings to support themselves. These investors typically have two goals:
- Goal One—Savings That Last: One goal is that your savings need to provide you with your living needs throughout your entire lifetime. In other words, your savings need to last at least as long as you do, through all kinds of market conditions—both bull and bear.
- Goal Two—Savings That Provide Large Annual Paychecks: The other goal is that your savings should provide you with enough financial resources so you can do the things you want to do during retirement. In other words, you want your retirement savings to provide you with as large an annual paycheck as possible.
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