Making Your Money Last in Retirement

How you invest your money during retirement will affect your feelings about your “success” in retirement. Diversification, the idea of investing in different types of assets (like stocks, bonds and cash), always pays off in the long run. With many people living 20 or 30 years or more in retirement, that’s a “long run.”

Recognize there will be times when stocks stink (like 2008 and early 2009). And there will be times when stocks shoot out the lights (like the 1990s). The same is true for bonds, for cash, and for pretty much any investment type. So since the future can’t be known in advance, the wise investor puts her eggs in many baskets—diversification.

Another important factor to your retirement success is how much money you withdraw from your retirement accounts each year. For most folks, a reasonable withdrawal rate is somewhere between 3% and 5% of their nest egg. In general, the higher the percentage you withdraw, the more long-term growth you’ll need out of your retirement accounts. The tradeoff is that with a higher growth potential comes more dramatic ups and downs.

Now there are lots of factors that affect your withdrawal percentage. When do you start taking Social Security payments (later is usually better for many folks)? How much are those payments? How long do you expect to live in retirement? Are you planning just for yourself or you and your spouse? Do you want to leave an inheritance for your children or perhaps a favorite charity? How is your health? What kind of medical or long-term care insurance, if any, do you have?

Those are all important questions to answer when trying to figure out a reasonable withdrawal rate for your retirement plans. You should also look at your living expenses: can you adjust your budget down (or up) to make retirement more enjoyable? Beyond Social Security and your own retirement accounts, are there other resources of income available to you? Perhaps you have money saved up in a life insurance plan that can be converted to an annuity, or maybe you want to consider taking equity out of your home. Maybe you’re due a pension benefit from a company or union that you worked for several years ago.

All of these variables go into the pot when figuring out how much you can withdraw each year. The goal is both practical (to avoid running out of money in your golden years) and enjoyable (to live your retirement life to the fullest, however you define success). Are you planning wisely to make your money last in retirement, to maximize your retirement readiness?


About Mike Wilson

Michael L. Wilson, MBA, CFP®, CRC®, is the owner of Integrity Financial Planning. Prior to founding Integrity in 1998, he worked for two years as a faculty member at the College for Financial Planning in Denver, training other financial advisors. Mike has 10 years of experience in the mutual fund industry, having worked with Fidelity Investments and Invesco Mutual Funds. He holds an MBA in Finance from Baylor University. Learn more about his work at
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