Retirement is a time when people should be able to enjoy their hard-earned savings and investments. However, it is also a time when people can make costly mistakes with their retirement portfolio withdrawals. In this podcast, the host discusses the five biggest mistakes that people make and how to avoid them.
The first mistake that people make is withdrawing too much too early. When people retire, they may be excited to start spending their savings, but this can be a catastrophic mistake. Bill Bengen recommends withdrawing no more than 4% of the portfolio per year, which is known as the 4% rule. However, it is important to warn you that this may not be the best rule for everyone and suggests evaluating withdrawal rates based on individual circumstances.
The second mistake is not pulling Social Security at the best times. Many people take Social Security early, which locks in a reduced rate. We must be evaluating Social Security options carefully, as it can be a significant portion of retirement income.
The third mistake is not accounting for gap years. This is when people retire before they can start receiving Social Security benefits. During these years, people may need to withdraw more from their retirement accounts, which can lead to overspending early on.
The fourth mistake is not knowing the income number. People need to understand how much they are spending and estimate future expenses accurately. This number is crucial for calculating withdrawal rates and avoiding overspending.
The fifth and final mistake is not having enough short-term funds available. People may need to use their investment accounts to distribute income, but these accounts are subject to market fluctuations, which can be uncomfortable. To mitigate distributions in volatile markets you can position short-term funds to avoid this problem.
To combat these mistakes, it is recommended to evaluate each individual circumstances carefully and seek professional advice if necessary. Retirement income distribution is a complex process, and it is essential to get it right to avoid financial difficulties in retirement.
Overall, the key to avoiding retirement portfolio withdrawal mistakes is to plan carefully, be patient, and seek professional advice when needed.