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How Will You Spend Your Retirement Savings?

In building a retirement nest egg, it’s important to decide whether you plan to live solely off the earnings of your savings or whether you plan to dip into principal during your retirement years.  Many retirees take a middle ground.  They live to the extent possible off earnings from retirement savings but dip into principal if the rate of return on savings drops or if inflation erodes the buying power of their income.  Ask yourself a few questions before deciding how you want to spend your retirement:

  • Do you want to preserve assets for family members?  If you dip into principal to support your retirement, there will be less to pass to children or grandchildren.

  • Can you make the switch from saving for retirement to spending during retirement?  Some life-long savers may find it difficult to make the abrupt change and scrimp needlessly.

  • What other sources of income do you have?  If you underestimate your life expectancy, your retirement savings may be depleted early.  Determine how much of the income you need will come from Social Security, annuities and retirement plans that pay income for life, no matter how long that might be.  Consider using some assets to establish a charitable gift annuity that will make payments to you for life, no matter how long that is, while also supporting organizations that are important in your life.

  • The table below shows how long $100,000 of retirement savings will last at various interest rates and rates of monthly withdrawals.

Monthly
Withdrawal

3%

4%

5%

6%

7%

8%

9%

10%

$400

32

43

*

*

*

*

*

*

500

23

27

34

62

*

*

*

*

600

18

20

23

29

*

*

*

*

700

14

16

18

20

25

*

*

*

800

12

13

14

16

18

22

30

*

900

10

11

12

13

14

16

19

26

1,000

9

10

10

11

12

13

15

17

1,200

7

8

8

9

9

10

10

11

1,400

6

6

7

7

7

8

9

9

1,600

5

5

6

6

6

6

7

7



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