Ready to tap into your retirement fund? Here’s how to get started


There might not be a better way, but there is, I think, a safer way.

You are right: a person who is about to withdraw money from their retirement savings can choose from a dozen or more methods. The so-called 4% rule is one of the best known. Here you take out about 4% of your nest egg in the first year, then that amount in dollars and more to account for inflation each year thereafter.

You can also use “dynamic spending rules”, in which annual withdrawals are linked to and change with your portfolio performance. If your nest egg increases in value, your withdrawal also increases, and vice versa. One example is Minimum Required Distributions, or RMDs: the same calculations (courtesy of the Internal Revenue Service) used to calculate annual withdrawals from tax-deferred accounts can be applied to your retirement savings as a whole. .

These and other methods all have the same goal: to make sure your nest egg doesn’t expire before you do. And all of them have the same drawback: given the myriad of variables involved (among them: life expectancy, market returns, the sequence of those returns, inflation, your assets and their allocation), it is always possible that your savings fall to unusually low levels – or, conversely, that you die with piles of unspent money. (Yes, some people end up regretting not having taken advantage of their strengths more and / or sooner.)

If you go for DIY, I would recommend that you first get a copy of “How Much Can I Spend in Retirement?” by Wade Pfau. Mr. Pfau, professor of retirement income at the American College of Financial Services, examines in detail most of the main strategies for tapping a nest egg (his most recent book, “Retirement Planning Guidebook,” places these withdrawals in more context. large).

Second, spend some time with Karsten Jeske, Chartered Financial Analyst and author of the Early Retirement Now blog, which largely focuses on safe withdrawal rates. Note: none of these experts are for the financially sensitive; some of their research and writing can be difficult to navigate. But the rewards can be significant.

Again, all exit strategies have their virtues and their flaws. As such, a safer route might be to put that decision on hold and focus, first, on establishing a “secure base of lifetime income,” says Joe Tomlinson, actuary and financial planner.

Yes, your goal is not to run out of money in retirement. But we can divide that goal into two parts: not running out of money for essential expenses (like accommodation, food, and health insurance) and not running out of money for discretionary expenses, like travel. If you can cover the former with guaranteed sources of income — social security, a pension, an annuity, a reverse mortgage — then choosing the “best” withdrawal strategy becomes less critical, says Tomlinson.

“With a secure income base, year-to-year variability [in withdrawals from retirement savings] is mitigated by the secure base. “

Fortunately, there is a good book outlining this very approach. “Don’t Go Broke in Retirement,” by Steve Vernon, a research consultant at the Stanford Center on Longevity, envisions establishing, first, “retirement checks,” a reliable monthly income and, second, the establishment of “Retirement bonus,” Mr. Vernon’s description of savings withdrawals. (He prefers to use RMDs and shows how the calculation would work for retirees 60 and over.)

In short, valuable read with lots of great examples and a smart way to make sure your money lasts as long as you do.

I have a question on social security. My wife will receive a larger benefit than me, approximately $ 9,000 more per year. It doesn’t matter which of us claims social security first?

It could mean a lot.

So-called spousal claims strategies, in which a couple seeks to maximize their social security payments over their lifetime, have changed in recent years. Two of the most popular approaches – “drop and suspend” and “narrow enforcement” – were largely eliminated under the bipartisan budget law of 2015. That said, there are still options couples should weigh first. to apply for benefits.

To begin with, I’m assuming the number you’re quoting is based on your respective “full retirement ages”. This is the age, according to the Social Security Administration, at which a person can first receive an unreduced benefit. your wife – who is apparently the most employed – to wait until she is 70 to apply for social security. In the meantime, you could apply for benefits when you reach full retirement age.

This approach offers several advantages. First, your wife will receive “deferred retirement credits,” which will give her the greatest possible benefit as an individual and help increase your combined payment as a couple. Second, if your wife died first, you would be entitled to her. at the age of 70, the highest possible survivor benefit.

And third, if you claim benefits at full retirement age, you could both get a monthly Social Security payment while you wait for your wife to file her return.

Of course, there are caveats. This approach tends to work best if you are both in good health, around the same age, and if your wife can, in fact, wait until she is 70 to claim benefits. This is why it makes sense to take advantage of Social Security calculators that can take such variables into account and help couples make those decisions.

Two of our favorites (and both are free): Open Social Security and the AARP Social Security Calculator.

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