When earned income ends it is time to turn on portfolio distributions. This can be an anxious time for new retirees as they transition from savings mode to distribution. The routine and satisfaction of seeing accounts grow challenges one’s emotions when money starts coming out.
Many people look to determine how much they can take out of their portfolio and spend to that level, rather than the approach of measuring the longevity of your retirement nest egg for continued standard of living. Some set an amount thinking they can manage to that, with inflation adjustments, and will simply learn to only live to that level. Some look to a distribution rate that doesn’t overly stress their portfolio.
While opinions differ, the commonly agreed upon distribution rate for people retiring in their 60’s is 3-4% of your retirement asset base, increasing to 4-5% in one’s 70’s and 80’s.
Not many people want to change their quality of life when they retire. You may even want to increase spending for activities and travel now that there is more time to do fun things. A well-planned approach via a thoughtful financial plan can not only help identify gaps, it can build comfort and confidence in your ability to continue living the life you have built.
The potential pitfalls of overspending in the early stages of retirement, believing life will slow down as aging continues, belies the reality of longer and healthier lives. Rationalizing the future to benefit the present may erode initial financial confidence – and portfolios.
If having confidence in your ability to maintain your standard of living throughout your lifetime is important, work with a professional to develop a personalized plan for your future.
Call us at 602.923.9800 or email affinitywealthadvisorygroup@ampf.com for a complimentary consultation.
Read more articles by Affinity Wealth Advisory Group