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Question on the distribution of retirement savings
Posted on 10/7/14 at 3:13 pm
Posted on 10/7/14 at 3:13 pm
Say the bulk of your retirement is in the stock market. One of your options on the day of retirement could be to completely cash out and put the money in the bank. Another option could be to keep it in the market and draw a certain amount or certain percentage each year. The latter strategy has the benefit of letting that money continue to grow while in retirement. The downside of that is you are still exposed to the potential losses of the market.
IMO, people with smaller amounts saved would be drawn to the first strategy, because they can't afford to lose. OTOH, those with more saved would be better able to potentially ride out the ups and downs of the market, while having a better chance of higher ROI at the end of retirement.
1. Do you agree with my assessment?
2. What are your thoughts on those two courses of action?
3. How much retirement money would you need in order to feel okay leaving it in the market? Or is the amount better expressed in terms of percentage you intend to take out each year? I have heard 4% as the number you should be able to take out without running out of money.
IMO, people with smaller amounts saved would be drawn to the first strategy, because they can't afford to lose. OTOH, those with more saved would be better able to potentially ride out the ups and downs of the market, while having a better chance of higher ROI at the end of retirement.
1. Do you agree with my assessment?
2. What are your thoughts on those two courses of action?
3. How much retirement money would you need in order to feel okay leaving it in the market? Or is the amount better expressed in terms of percentage you intend to take out each year? I have heard 4% as the number you should be able to take out without running out of money.
2
Posted on 10/7/14 at 3:18 pm to Stingray
quote:
Do you agree with my assessment?
No. You can go to cash "inside" of a retirement account. 4% seems like a good working number.
Posted on 10/7/14 at 3:27 pm to Stingray
quote:
One of your options on the day of retirement could be to completely cash out and put the money in the bank.
I can't say where this is ever a good idea. Keep the money inside the retirement account. You can get real conservative with it (i.e. all high quality bonds with a year or two of distributions in cash) but that would be as far as I go.
quote:
IMO, people with smaller amounts saved would be drawn to the first strategy, because they can't afford to lose. OTOH, those with more saved would be better able to potentially ride out the ups and downs of the market, while having a better chance of higher ROI at the end of retirement.
In real life, most people when they don't have enough, leave it in, hoping that growth will make up for what they did not save. Not saying I agree with that strategy, but that is what often happens.
Posted on 10/7/14 at 4:20 pm to LSUFanHouston
Would you ever recommend keeping it aggressive with a lot of stocks? Maybe if the person had
a bunch saved and only needed less than 4% a year?
a bunch saved and only needed less than 4% a year?
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