![]() ![]() Most good savers have money in more than one savings vehicle. Saving well enough, and creating a personalized plan, so that you can live entirely off the income from your investments helps protect you from running out of money. Which in-turn forces you to use more and more of your principal each year to survive. They derive some income from their investments, but not enough to live on, so they are forced to tap their savings principal, which means each year that principal gets smaller and smaller, which means that each subsequent year, the interest income steadily decreases. This is ideal, and it should be your goal, but why?įor great savers who aren’t born into immense wealth, there typically is no magic number that guarantees you’ll have enough money to live with no financial worries for the rest of your life.īesides the inevitable financial emergencies, there’s a cycle, a trap, even, that a lot of people retire and fall into. Whether you’re forced to retire early, or you just wake up one morning and say, “That’s enough of that,” one definition of financial independence is when you’ve accrued enough savings that you not only don’t have to work (unless you want to), but you can live entirely off the income derived from your investments (and not touch the principal). Which brings us to… Use-only withdrawal income This rule follows the thinking that a 4 percent annual withdrawal rate in the first year of retirement (followed by inflation adjusted withdrawals going forward) is probably safe (read: won’t deplete your savings) because there’s a reasonable expectation of earning a 4 percent annual return on a properly diversified, moderate-risk portfolio. What’s bad about the rule, and why I’m not a huge fan, is that it’s much too simple of an approach for people who have complex financial situations. It’s popular in-part because it’s easy to explain. ![]() If you research retirement withdrawal strategies, you’ll come across what’s known as the 4 percent rule. Here are 4 early retirement withdrawal strategies for you to consider. The other half involves taking smart, well-timed, money-saving distributions from your accounts. Also remember, that saving money for retirement is only half the battle. He or she will work with you to construct a plan that helps to protect you from making costly and avoidable financial mistakes. ![]() Remember, everyone’s situation is unique, and everyone needs a personalized plan.īefore I get started, immediately speak with your fiduciary advisor if there are any changes to the date you intend to retire. If, for any reason, you retire early, how would that change your savings and retirement account distribution strategy, and how should you respond? Sometimes it’s planned and sometimes it’s not. Other times, it throws you a perfect pitch right down the middle and you smack it out of the park.Īnd then there’s early retirement. Allworth Co-CEO Scott Hanson outlines some of the ways to access your money if you're retiring early. ![]()
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