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Nate Obringer, RICP®
Financial Advisor
Prudential Advisors
9800B McKnight Road, Suite 223
Pittsburgh, PA 15237
Phone: 412-318-4129
Fax: 877-840-2322
Email: nate.obringer@prudential.com
January/February 2021
Retirement Income
Planning for retirement involves estimating monthly income needs and determining which retirement funds to tap first. There are several general retirement income strategies to consider, but the key is to customize withdrawals to best fit your situation. Here are a few:
The 4% Rule
Many people use the 4% rule and withdraw 4% of their portfolio each year. Although this approach provides a predictable annual income, it’s not without its drawbacks. If the bulk of your retirement savings are subject to market volatility, your monthly income could drop, too.This is a “set it and forget it” method. It does not take into account other sources of income, such as part-time employment, or changing needs. This may be a good way to get a general idea about how much income your investments will likely generate, but when you are close to retirement, it’s important to build in some flexibility.
Fixed Amount
Another option is the fixed dollar amount approach. In this case, you’d withdraw a fixed amount each year based upon your budgeting needs. For simplicity you could withdraw the same amount each year and reassess your situation annually. And if changes are needed, make them at that time.Interest Only
This approach has you withdraw only interest payments you receive from your investments. For this method to be beneficial, most, if not all, of your retirement savings will need to be invested in fixed income securities, like corporate or government bonds. The benefit of only drawing on your interest payments for your retirement needs means that your principal remains intact ready to use when an emergency arises.RMDs
When developing the strategy that’s right for you, you’ll want to plan for taking required minimum distributions (RMDs) from your tax-deferred plans (e.g. traditional IRAs, 401k or other employer sponsored plans). The required distribution amount depends on your age and the balance of your accounts.Work with your tax and financial professionals to create a a custom and personalized retirement distribution strategy that works best for you.
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