However, that flexibility should come with caution in managing the amount you withdraw so as not to risk outliving your assets. Systematic withdrawals offer the flexibility to control and change the amount and frequency of your income. An adaptive withdrawal strategy may include elements of the most common strategies for drawing down a portfolio. Once you've determined the lifetime income stream that is right for you, it's time to turn your attention to withdrawing income for your other needs. Consider these common types of withdrawal strategies However, there is no guarantee that diversification will protect against a loss of income. Diversification is a technique to help reduce risk. Since different types of investments tend to perform differently over time, a diversified mix could help mitigate some of the risk. Your asset allocation strategy should take into account your long-term goals, income needs and risk tolerance. Please note also that there is no guarantee that asset allocation reduces risk or increases returns.Īnd while it's difficult to eliminate investment risk, you may be able to manage it by having a diversified investment portfolio. However, it is important to keep in mind that there are risks in investing, including the loss of some or all of your investment. Some exposure to potential growth investments, like equities or real estate, may help your portfolio keep pace. Over that same period, very conservative investments may have a hard time keeping up. Remember how much cheaper everything was 30 years ago? If inflation stays high at around 7%, the value of your money could be reduced to half in about 10 years. Keep in mind that retirement could last for more than 30 years. While decreasing some equity exposure can reduce market risk, moving too far into bonds and cash might open a portfolio to inflation risk that can be damaging to your long-term withdrawal strategy. One of the common misconceptions that investors make as they near retirement is the idea that their portfolio allocation should include fewer equity and growth investments in favor of more bonds and cash-like investments. Even as you draw from a portfolio in retirement, consider balancing your investments among those with growth potential and ones with less risk. Your investment mix, or asset allocation, is a crucial part of your withdrawal plan. How to withdraw money from retirement: determine your investment mixīefore settling on a withdrawal strategy, evaluate your investment portfolio to make sure the investments are still in line with your long-term goals. Please note that guarantees are based on the claims-paying ability of the issuer. If you use a portion of savings to purchase a fixed annuity that creates regular, reliable income to pay for everyday expenses, you can have a more flexible approach to how your remaining savings are withdrawn. There are different strategies that may work depending on your immediate income needs, your tolerance for risk, and your age. Knowing how to withdraw money from retirement accounts doesn't necessarily entail sticking to a steady, fixed distribution throughout retirement. There are many ways in which to start drawing down your retirement savings, but each should be managed carefully to make sure you don't outlive your money. Creating a retirement income plan can help you define your withdrawal strategy - or when and how often you will pull money from your retirement investment accounts.
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