If you don't increase your withdrawal amount and the inflation rate is high, you can lose buying power over time. The advantage of fixed-dollar withdrawals is that you have an expected annual income and can determine the amount to withdraw based on your budget in the first five years of retirement. For example, you may decide to withdraw 1,000 dollars every month for the first five years of retirement and then re-evaluating. If you want to learn more about the price level change and its effect, check our inflation calculator.įixed-dollar withdrawals involve taking the same amount of money out of your retirement account every year (or other intervals) for a set period. The advantage of the 4 percent rule is that it's a simple approach, and your buying power keeps up with inflation. If there is 2 percent of inflation (which is the target rate of inflation in the US and most countries), you will withdraw 12,240 dollars in the following year. And from then on you should increase the amount to keep pace with inflation.įor example, if you have 300,000 dollars in your account, you would withdraw 12,000 dollars (1,000 dollars monthly) in your first year of retirement. The 4 percent rule withdrawal strategy suggests that you should withdraw 4 percent of your investment account balance in your first year of retirement. Let's explore what are the retirement plan withdrawal possibilities. A smartly chosen early retirement withdrawal strategy can support you in such a situation. If you happen to put aside such savings or consider opening an investment account devoted to your retirement, it is essential to ensure that your money will last long enough. Since Social Security benefits are not always sufficient to keep up the living standard you are used to during your post-income-earning stage of life, you may decide to obtain a retirement account to provide additional income supplements.

Well drawdown calculator