“In this coming year, I’ll save about $150,000. I will get an inheritance, but hopefully not for a long time.” (Photo subject is a model.) - Getty Images/iStockphoto Dear Quentin, I am 55 and considering an early retirement in a year. I’m an attorney specializing in litigation. I have had five major jury trials in the last nine months. Although I love it and my firm — truly amazing people, each and every one — I am simply exhausted. I had a major health scare four years ago, and I’ve seen close friends ...

Core Insights - The 4% rule has been a long-standing guideline for retirement planning, suggesting that retirees can withdraw 4% of their savings annually without depleting their funds [1] - This rule is based on historical stock market returns but does not account for the sequence of returns risk, which can significantly impact retirement savings [2] Sequence of Returns Risk - Sequence of returns risk is described as a critical issue for retirees, where a market downturn early in retirement can lead to reduced capital for future withdrawals [3] - If a retiree experiences a market decline shortly after retiring, the withdrawals made during this downturn can permanently diminish their portfolio [4] Impact of Market Downturns - An example illustrates that retiring with $3 million and withdrawing 4% annually can lead to a significant loss if the market declines by 20% in the first year, reducing the portfolio to $2.28 million after withdrawals [4] - Even with a subsequent average return of 7%, the portfolio may still be worth only $2.75 million after ten years, indicating the long-term impact of early losses [5] Mitigation Strategies - There are strategies available to minimize the sequence of returns risk, allowing retirees to withdraw funds without being overly affected by market fluctuations [6]

Key Takeaways According to many financial planners, you won't have as many expenses in retirement as you did before you retire. Instead, they say, you'll need about 70% to 80% of your pre-retirement income to maintain your lifestyle in retirement. For the median U.S. household income ($83,730), you'd need about $5,233 per month in retirement. Using the 4% rule, that means that you'd need to save $1.57 million in total. When preparing for retirement, you're probably wondering, will I have enough? To ...

Key Points The 4% rule is a popular strategy for managing retirement savings. Suze Orman thinks 4% may be too aggressive a withdrawal rate today. She recommends a more conservative approach coupled with other means of attaining financial security in retirement. A recent study identified one single habit that doubled Americans’ retirement savings and moved retirement from dream, to reality. Read more here. A lot of people reach retirement age without much money in savings. But if you worked hard ...

Core Insights - The 4% withdrawal rule is widely accepted in the financial community, but its effectiveness can vary significantly depending on market conditions and individual circumstances [1][4][6] - There are two primary retirement income strategies: the traditional withdrawal approach and the income strategy focused on generating cash flow from investments [5][6] Withdrawal Strategy - The traditional withdrawal strategy typically involves selling shares annually, starting with a 4% withdrawal rate, which translates to $40,000 from a $1 million portfolio in the first year [3][6] - This strategy can be risky if retirees face a bear market shortly after retirement, as selling shares during downturns can deplete the portfolio more rapidly [2][10] - It is more suitable for retirees with smaller portfolios who need to maximize returns and can adjust spending during down years [15][16] Income Strategy - The income strategy focuses on structuring a portfolio to generate dividends and distributions, allowing retirees to live off cash flow without selling principal [5][7] - A $1 million portfolio yielding 5% would generate $50,000 annually, providing a stable income stream [7] - This approach is better suited for retirees with larger portfolios, typically over $1 million, who prioritize stability and predictability in their income [16][17] Market Conditions Impact - The effectiveness of each strategy is highly dependent on market conditions; the income strategy tends to outperform during prolonged bear markets or high inflation periods [10][13] - Conversely, in strong bull markets, the withdrawal strategy may be more advantageous as it allows for investment in growth stocks that appreciate significantly [11][12] Psychological Benefits - The income strategy offers psychological stability, reducing the stress associated with market fluctuations, as retirees receive regular income regardless of portfolio value [13][14][17] - This strategy can help prevent panic selling during market downturns, providing retirees with more control over their financial situation [14] Conclusion - Both strategies have their merits and are suited to different types of retirees based on portfolio size, risk tolerance, and lifestyle preferences [15][16]

Core Insights - Many older Americans are hesitant to withdraw from their retirement savings due to fears of running out of money during their lifetimes [1] Withdrawal Strategy - A lack of a withdrawal strategy can lead to depleting retirement savings; it is advisable to work with a financial advisor or conduct personal research to develop a suitable plan [2] - The 4% rule is suggested as a starting point for withdrawals, allowing retirees to withdraw 4% of their IRA or 401(k) balance in the first year, adjusting for inflation, which can help savings last for 30 years [3] - Customization of withdrawal strategies is essential; some may need to withdraw at a rate lower than 4% or higher depending on individual circumstances [4] Investment Strategy - While it is prudent to reduce stock exposure upon retirement to mitigate risk, completely eliminating stocks is not advisable [5] - A portfolio heavily weighted towards bonds (90% bonds and cash) may not generate sufficient income for a sustainable withdrawal rate, risking early depletion of savings [6] - It is recommended to consult with a financial advisor to determine a reasonable asset allocation, with a balanced approach that may include a mix of stocks and bonds [7]

You may be able to get more income out of your savings each year.A lot of people work hard to build a retirement nest egg. But then, once their careers actually end, they wind up disappointed when they realize they're able to withdraw only a limited amount of money from their IRA or 401(k) each year.Financial experts tend to promote the 4% rule for managing a retirement nest egg. The rule states that if you withdraw 4% of your IRA or 401(k) account balance your first year of retirement and adjust future wit ...

“We are buying long term-care insurance for a total cost over 10 years of $90,000.” (Photo subjects are models.) - MarketWatch photo illustration/iStockphoto Dear Help Me Retire, I am 56, and my wife is 50. We plan to retire at age 62. We each earn $100,000 per year. We have $973,500 in Edward Jones investments, $46,600 in our Robinhood HOOD account, $72,800 in high-yield savings accounts and CDs, and $15,900 in savings and checking accounts. I also have a life insurance policy with a cash value of $9,6 ...

Core Insights - Early retirement requires careful financial planning, as individuals need to save significantly more than traditional benchmarks suggest, often aiming for 8 to 10 times their salary by age 50 [7][18] - The average 401(k) balances for individuals in their 40s and 50s are $407,675 and $622,566 respectively, but median balances are much lower at $162,143 and $251,758, indicating that many are not on track for early retirement [3][6][8] - The 4% rule for withdrawals from retirement savings is becoming outdated; experts now recommend a more conservative withdrawal rate of around 3.5% to ensure funds last longer, especially for those retiring early [8][18] Financial Planning Strategies - Individuals should estimate their early retirement number by projecting annual expenses and considering inflation, healthcare costs, and unexpected expenses [11] - Maximizing contributions to retirement accounts, especially utilizing catch-up contributions after age 50, is crucial for building sufficient savings [12] - Building savings outside of retirement accounts is necessary to cover expenses before age 59½, as early withdrawals from 401(k) accounts incur penalties [13] Investment Considerations - A review of investment strategies is essential; individuals in their 40s should focus on growth, while those in their 50s should shift towards protecting their accumulated wealth [14] - Consolidating old retirement accounts can reduce fees and simplify monitoring of retirement savings progress [15] Healthcare Planning - Planning for healthcare costs is vital, particularly for those retiring before becoming eligible for Medicare at age 65; utilizing Health Savings Accounts (HSAs) can provide tax advantages and serve as a medical safety net [16]

Core Insights - Many individuals struggle to save adequately for retirement, leading to significant spending reductions once they stop working. However, those with substantial savings in their IRA or 401(k) should feel entitled to enjoy their retirement funds fully [1][2]. Group 1: Withdrawal Strategies - Establishing a sensible withdrawal rate based on the investment mix is crucial for retirees concerned about depleting their savings. A balanced portfolio of stocks and bonds may allow for a 4% withdrawal rate, equating to an $80,000 withdrawal in the first year for a $2 million balance [3][4]. - For those with different investment mixes, consulting a financial advisor can help determine an appropriate withdrawal rate tailored to the specific portfolio [5]. Group 2: Mindset and Purpose - Retirees may hesitate to spend their savings due to concerns about leaving an inheritance for their children. It is essential to remember that retirement accounts were primarily intended to fund one's retirement, not to serve as a legacy for heirs [6][7]. - Engaging in discussions with family members about inheritance expectations can alleviate feelings of guilt associated with spending retirement savings [7]. Group 3: Alternatives to Immediate Spending - Retirees should consider whether they need to access their nest egg immediately. Allowing retirement savings to continue growing may be a viable option if immediate withdrawals are not necessary [10].