You’ve Already Saved for Retirement. (Great!) But You Need a Withdrawal Plan, Too | Global News Avenue

Saving for retirement is only half the job. You’ll also need a plan for withdrawing your money, and many Americans don’t have a plan.

A recent survey by fintech firm IRALOGIX revealed that nearly half (49%) of retirees do not have a formal withdrawal strategy. At the same time, many respondents also said that they did not take into account the inflationary factors of market fluctuations in their preparations. Experts say this could lead to trouble down the road.

“This approach runs counter to a process that emphasizes sustainable withdrawal rates, which emphasizes long-term diversification of savings throughout retirement,” said Peter J. de Silva, CEO of IRALOGIX. Decision-Making Style , which could have significant long-term financial consequences. ”

Experts say that while there is no one-size-fits-all approach, there are a number of rules of thumb, such as the 4% rule, the bucketing method and guardrail strategies, that can serve as useful starting points for creating a systematic approach to withdrawals. retire.

“A formal strategy can provide structure, clarity and peace of mind as clients navigate retirement,” MaryAnne Gucciardi Certified Financial Planner (CFP) Financial Planning at Wealthmind.

Make it Simple: Start with the 4% Rule

Gucciardi points out that the popular 4% rulewhich suggests that a person can withdraw 4% from their account 60/40 Portfolio in the first year (with subsequent annual inflation adjustments) and does not run out of money during 30 years of retirement.

When helping clients develop successful withdrawal strategies, Gucciardi said considering factors other than inflation, including taxes, longevity and market performance, can make the plan more effective.

“While a fixed withdrawal rate (such as the 4% rule) is simple, it is not right for everyone… It does not take into account taxes, fees or market fluctuations, leading many advisors to make adjustments based on individual needs,” Gucciardi said.

Check spending through guardrails

Nathan Spohn, CFP and Managing Director at Spohn Partners, works with clients to develop financial plans in the years leading up to retirement and develop tax-saving strategies to leverage their various retirement accounts, such as 401(k)s and Roth IRA.

Sporn is a proponent of the guardrail approach, which allows retirees to increase their withdrawal rates during retirement bull market But they may be asked to lower their withdrawal rates during bear markets.

“Our plans should be based on a 3 percent withdrawal rate until age 65,” Spohn said, noting that early retirees can adjust the withdrawal rate up (up to 4 percent) or down as needed.

In the IRALOGIX survey, only 28% of respondents said they withdraw less than 3% of their portfolio each year.

Coping with stock market fluctuations through bucketing

For those wary of this Market Volatility in Retirement Portfoliosexperts recommend using the bucketing method.

This approach recommends maintaining a cash buffer of at least one year of expenses and is designed to minimize the likelihood of having to liquidate investments during a market downturn.

“The short-term portfolio holds cash or low-risk investments for immediate expenditure, the medium-term portfolio includes bonds to supplement the first expenditure, and the long-term portfolio invests in growth assets such as stocks to meet future needs and inflation protection. “Guciardi.