When you retire, there are many decisions to make that will shape your financial life. One of the most important relates to your withdrawal rate — the amount you take out of your retirement accounts. You don’t want to withdraw too much and potentially run out of money too soon. But withdrawing too little can leave you without enough income.
When you make your choice, it’s helpful to understand exactly how much money different withdrawal strategies can produce for you. This step is crucial in assessing whether your nest egg is large enough to provide a comfortable standard of living.
The chart below gives you an idea of what income your investment account can produce, which makes it one of the most important retirement charts you’ll ever see.
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How much income can your savings produce at a safe withdrawal rate?
There are different approaches to determining a safe withdrawal rate, but one of the most common is to follow the 4% rule. This rule of thumb suggests you won’t run out of money if you take 4% out of your retirement investment accounts during the first year of retirement and then increase your withdrawals each year to keep pace with inflation.
