Personal Finance: Im a retiree living off of my savings. Whats a safe withdrawal rate?
For retirees, the perfect portfolio withdrawal rate is a magic number that provides the extra funds they need to supplement their pension and Social Security each year, but also maintains their portfolio’s viability for as long as they live. Several studies in the bull market of the 1990s suggested that 5% was a safe withdrawal rate, and 6% to 7% could work if you had a high percentage invested in stocks. However, most credible studies found that lower rates, of 4% to 4.5%, were sustainable if you could accept a 10% to 20% chance of plan failure. Yet most retirees would prefer as close to 100% odds of success as possible. In virtually all of the sustainability studies, if you take on more risk (i.e., investing in stocks), you can count on a higher withdrawal rate as part of your personal financial plan. The problem facing retirees with portfolios invested in stocks is that the sustainability of the portfolio when you are withdrawing from it depends on the timing of stock market returns
