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your CO-OP PAGE 14  JANUARY 2013 HEALTHY LIVING


Withdrawing your


money in retirement How to make your money last


BY DOREEN FRIEL


lot about saving and investing wisely for retirement. What you may not have heard a lot about, however, is the other side of the coin—how to wisely withdraw money from your retirement plan when the time comes.


I


The tricky part is estimating how much to withdraw from a retirement plan each year. Depending on the type of plan, the government requires most retirement savers to begin withdrawing a certain amount of money from their retirement plan accounts after reaching a certain age (check with your financial professional for more information), but most people want—or need—to start taking their money before that. And, as you might have guessed, many want to withdraw more than the government requires them to each year.


Unfortunately these cash-eager retirees risk running out of money in their lifetime.


According to Barney Lee (“Americans All Over the Map on Retirement Drawdown Rates”), 34 percent of people surveyed had no idea how much they will need to withdraw each year from their retirement plan accounts—and 15 percent planned on drawing down 10 percent or more of their savings each year. But is that too much?


f you’re like a lot of people who are trying to save for a more secure financial future, you’ve probably heard a


According to the MetLife Mature Market Institute, financial professionals advise that individuals withdraw no more than four percent to six percent of their retirement savings each year in retirement in order to make their money last a lifetime. In “The 2011 MetLife Retirement Income IQ – A Survey of Pre- Retiree Knowledge of Financial Retirement Issues” (October 2011), it was revealed that 56 percent of survey participants correctly responded that they could withdraw about $600 monthly from a $100,000 nest egg to last for 30 years in retirement. Alarmingly, the remaining 44 percent of respondents expressed the incorrect opinion that they could withdraw significantly higher amounts—anywhere from $800 to $1,200 per month—and still have their retirement savings last a lifetime.


If you don’t think your money needs to last long in retirement, you may want to think again. According to the Transactions of the Society of Actuaries Annuity 2000 Table for Males and Females, males who reach age 65 have a 50 percent chance of living beyond 85. Females who reach age 65 have a 50 percent chance of living beyond 88. And for couples that both reach age 65, there’s a 50 percent chance that one of them will live beyond age 92.


There are lots of things that you can do to help make sure that you have enough money to last you throughout


PHOTO: NATIONAL RESOURCES CONSERVATION SERVICE.


Plan on withdrawing no more than 4 percent to 6 percent of your retirement savings each year to make your retirement savings last a lifetime. To make money last, plan on low-cost activities like camping and fishing.


retirement. Perhaps one of the most important steps you can take is to consult a financial professional—long before you retire. He or she can help you determine, based on your circumstances, how much money you may need to save for retirement, and at what age you may be able to afford retirement. If retirement is just around the corner, a financial professional can help you decide whether delaying your retirement by a year or two or working part-time during retirement can make a difference in your level of retirement income.


But, perhaps most importantly, a financial professional can help you decide how much to withdraw each year from your


retirement plan—without taking too much. A little planning today can help you ensure your financial security for many years to come.


For more tips, visit www. mymoney.gov.


Doreen Friel is a marketing communications consultant who produces employee benefits- related materials for the Employee Benefits Communications department of the National Rural Electric Cooperative Association, the Arlington, Va.-based service arm of the nation’s 900-plus consumer-owned, not-for-profit electric cooperatives.


CEC


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