Many factors could have a significant influence on your retirement, from unforeseen expenses, such as high costs of caregiving or medical in your area, to drastic declines in the stock market. If you don’t use your retirement savings and investments, you are certainly guaranteed a lower lifestyle standard, than what you could achieve otherwise. Not spending, or spending too little, aren’t traits of safe withdrawals.


Unfortunately, not many retirees have identified a sturdy spend-down strategy that would allow them to enjoy their retirement without outliving their hard-earned assets.

According to J.P. Morgan Asset Management and the Employee Benefit Research Institute, nearly 80% of retirees do not begin withdrawing money from their accounts until required minimum distributions (RMD) begin. Additionally, of those at RMD age, 84% took no more than the minimum quantity.

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Basically, retirees allow RMDs to dictate how much they can take out of their retirement accounts, which could be a great mistake.

RMDs are the amounts that the government requires you to withdraw each year from your traditional retirement accounts, after reaching the age of 72. Each person’s RMD is calculated by dividing your retirement accounts’ balances from the previous December 31, by your life expectancy.

Given that most people retire in their 60s, age 72 is a long stretch of time to wait before using an important source of retirement income. Furthermore, only withdrawing the minimum amount from your accounts, could mean that you pass away with a significant portion of your assets remaining.

If you wouldn’t want someone else to enjoy the funds you worked hard for, what then is a safe rate of withdrawal that would allow you to live the retirement you want?


Outliving your accounts vs. Being outlived by your accounts

The rate at which you withdraw from your accounts certainly influences your portfolio’s longevity. The chart below displays the longevity of a $500,000 portfolio composed equally of stocks and bonds, over a 20-year period, spanning from 2000 to 2020.


Source: BlackRock


It is not clear that a low withdrawal rate will produce long portfolio longevity, and vice versa. The example portfolio with a withdrawal rate below 4% even grew beyond the starting balance. While this may sound attractive, there are potentially significant drawbacks to an overly conservative withdrawal rate. This is the opportunity cost of not using any of that money to enjoy your retirement, even though you had the ability to.

Retirement was never meant to be a time to accumulate your assets. It’s meant to be a time to spend down assets so that you can achieve your long-term financial goals - the vacation home along the beach, the vacations you always wanted, etc.

That doesn't necessarily mean that all retirees should start thinking about how to spend more either. Instead, this highlights the fact that a plan to utilize your assets is just as important as one to grow and accumulate them. Balance and flexibility must be practiced as retirement is approached and lived through.


Withdrawing safely, while maintaining the lifestyle you want

There is plenty of uncertainty surrounding retirement. Important variables include your health, financial market performance, your interests, anything that could change at a given time.

The best way to adapt to personal and market changes through retirement is to be flexible with your withdrawal rate. Consider this the power to rewrite the story of your retirement as your life, and financial settings go through changes. At the end of the day, a safe withdrawal rate is a flexible withdrawal rate.

Simply explained, you are to allow yourself to withdraw a little more in some years, and a little less in other years. In a given year, you might increase your withdrawal rate to fund home renovations or a family vacation. Then, you may reduce your withdrawals during a market downturn, as long as you cover your necessary expenses).

Of course, the portion of your savings that can be sustainably spent each year through retirement is influenced by many personal factors, such as your annual expenses, amount of wealth, age, market conditions, retirement age, sources of guaranteed income (social security, pensions), etc.

Given how many moving parts retirement is composed of, it is greatly rewarding to partner with a professional financial advisor.

Financial advisors are able to provide detailed assessments by using financial planning software that takes your information into account, and creates thousands of simulations, showing how your portfolio would perform in varying conditions. You would be able to identify your portfolio’s sustainability under different withdrawal rates, and then build a retirement income strategy that is ideal to you.

Greater confidence is a result of implementing a retirement income strategy as a core part of your retirement plan. According to a retirement study performed by Franklin Templeton, 82% of people who designed a written plan, have a strategy to generate income that could last 30 years or more. That does not have to come at the cost of enjoying your retirement. A study performed by Northwestern Mutual found that 71% of Americans working with a financial advisor claim they are “happy with life,” compared to the 50% of those without a financial advisor.

A well-balanced and diversified portfolio should produce the preservation and growth you need through your retirement. Having a flexible withdrawal rate will then increase the likelihood that you live a secure, and fulfilling retirement.


The Retirement Group is not affiliated with nor endorsed by,,,,, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that focuses on transition planning and lump sum distribution. Neither The Retirement Group or FSC Securities provide tax or legal advice. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with FSC Securities and may be reached at

TRG Retirement Guide

Tags: Retirement, Withdrawal