Surviving the Savings Loss

February 23rd, 2009 by Jim Cotterman

An earlier post covered how much one can safely withdraw from a retirement fund.  See 8/15/08, Spending Those Retirement Savings.  A new article in the AAII Journal (American Association of Individual Investors, February 2009) entitled, Retirement Income:  Repairing the Damage to Assure the Flow, discusses how retirees and near retirees should cope with lost savings.  It is based on research by T. Rowe Price Associates. 

Their research indicates that the most likely reason retirees run out of money is over-withdrawal in the early years of retirement.  The first five years of retirement are especially critical. 

Earlier advice about the importance of diversification and using a 4% withdrawal rate remain.  Further guidance is given on foregoing cost of living increases for five years and/or reductions in withdrawal amount.  Remember that you will likely need to have financial resources for up to three decades of retirement and wrestle with the long term corrosive affects of inflation.

This entry was posted on Monday, February 23rd, 2009 at 3:06 pm and is filed under Retirement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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