7 Commandments for Retirement
4. Withdraw 5 Percent a Year Initially, then Step Up
A possible downside of retirement savings is that sometimes, people might outlive their savings. This can be due to high cost of living or increased life expectancy. High inflation rates are also great retirement killers. The worst part of high inflation is that a very good sum of money can reduce to a smaller amount because of it. Improved healthcare system in the country has also increased life expectancy. So, if you do not want to outlive your nest egg, do not withdraw more than 5 percent of stash within the first 5 years or retirement. This can be slowly increased to 10 percent by the time you are 70. By the time you are 80, you can increase the rate to 20 percent. You can also safely withdraw half the inflation-adjusted amount each year.
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