According to studies performed by Michael Kitces and reported in the Financial Planning Journal:
A safe withdrawal rate for a 30-year period (meaning you don't run out of money) may be:
4.5% in an over-valued market (think year 2000)
5.0% in a fairly-value market (much of the time)
6.5% in a severely under-valued market (after a market crash like March 2009)
In addition, the age when you start withdrawals also has an effect:
Age 65, you may be able to withdraw 4-4.5%
Age 75, you may be able to withdraw 6-6.5%
However, these studies are based on historical data and, much more importantly, on keeping a hefty portion of your portfolio in stocks (most studies assume an allocation of 50%/50% or even 60% stocks and 40% fixed income). If you think you can withdraw 5-6% per year keeping most of your investable assets in CD's and money markets you may not be able to keep up with inflation.
In 10-15 years, when you may need to withdraw twice as much as you are at the start of retirement now you just may not have the flexibility to do so.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.