Getting and Spending, Retirement Edition

Saving for retirement is a simple concept, but how do you deal with that accumulation of assets on the other end, when you’re in retirement and need to shift from saving mode into spending mode?

For decades, experts have been recommending the 4% rule — the formula that says over 30 years of retirement, you’re unlikely to run out of money if you start your retirement by withdrawing 4% of your assets the first year. After that, you adjust for inflation. Sounds sensible, stable and safe.

No longer. Bill Bengen, the financial advisor and architect of the 4% rule, now says that withdrawal rate should be more like 4.7%. Bengen, who published his paper in 1994, has increased the withdrawal rate based on his own research and on “adding a number of asset classes which have increased returns.”

Adding U.S. microcaps in his last round of research increased volatility, he explains, but it also led to higher returns, which significantly increased the withdrawal rate.

Speaking of increased returns, if you’ve been dreading looking at your portfolio, you can relax for now. A slower pace of inflation caused stocks to rise on Tuesday. For more, read our reporter Sarah Hansen’s story on what to expect in 2023.

Your home may be your biggest asset. Buy accordingly.

Whether you’re buying your next home for a short-term need or its long-term potential, make sure you do it the right way. 

AmeriSave Mortgage can help you quickly and easily get to closing. With a competitively low mortgage rate and credit approval in just 3 minutes, our lending professionals make home happen.

• If you’re not collecting Social Security yet, do you still get the 8.7% Social Security cost of living increase? Short answer: yes.
• Move south for retirement? Most baby boomers and Gen Xers plan to stay where they are, according to a Bank of America study.
• Open enrollment just ended, but here's some info that might make you rethink choosing a Medicare Advantage plan next year.