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How much can I safely withdraw each year?

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To make sure your money lasts throughout retirement, use a conservative withdrawal strategy that assumes there will be uncertain markets along the way.

Naturally, you worry that you’ll go through your retirement money too quickly—especially if the market has left you with a smaller portfolio.

We believe a good rule of thumb is to withdraw 4% of your portfolio in the first year of retirement and increase that dollar amount every year by the rate of inflation. That way, we estimate a conservative-to-moderate portfolio has a 90% chance of lasting for 30 years—even with ups and downs in the market.

  • Withdraw 4% of your portfolio’s value the first year.
  • Increase your withdrawal amount each year to keep pace with inflation.
  • During adverse market conditions, try to limit your withdrawals to covering essential expenses only—or at least forgo the annual inflation increase.

Here's an example.

First-year withdrawal  
Total value of your portfolio $1,000,000 x0.04
First-year withdrawal $40,000

Next year's withdrawal  
First-year withdrawal
Adjustment for 2% annual inflation
Next year's withdrawal $40,800

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