With some strategic planning you can establish a game plan for withdrawal designed to provide the income you need to fund your retirement without the fear of running out of money. Some of these strategies, discussed below, will even help you stay ahead of inflation.

The 4% Rule

This method dictates that you withdraw 4% from your IRAs, 401(k)s and other tax-deferred accounts in the first year of retirement. For each year following, you increase the dollar amount of your annual withdrawal by the previous year’s inflation rate. For example, if you withdrew $40,000 in the first year of retirement, and inflation that year is 2%, in the second year of retirement you would withdraw $40,800.

The 4% rule is intended to secure your savings in a way that you won’t outlive them, but even avid supporters are quick to point out that it should be used as a guideline, not a steadfast rule, and may need to be adjusted according to the market and rising interest rates.

Fixed Dollar Withdrawals

Using this approach, you take out a fixed dollar amount monthly or annually—say, $40,000 annually—and then reassess this amount at the end of a predetermined period, such as five years. This provides a predictable annual income, which can help you budget accordingly. However, it is not inflation-proof, nor does it protect against eroding your principal. Furthermore, if your investments are down in value because of market volatility, you may be forced to sell more of your assets to meet your withdrawal needs.

Systematic Withdrawal

With a systematic withdrawal plan, you only withdraw the income generated by the underlying investments in your portfolio (i.e., interest or dividends). Because your principal stays untouched, you are less likely to run out of money. You may even grow your investments over time while still retaining retirement income. However, because your income depends on market performance, the amount you receive year to year will fluctuate. Keep in mind, too, that this method poses the risk of getting outpaced by inflation.

Withdrawal Buckets

The “buckets” strategy calls for withdrawing assets from three “buckets”, or separate types of accounts that hold your assets.

• A savings account that holds three-to-five years of living expenses
• Mostly fixed-income securities
• Remaining investments in equities

As you use the cash from the first bucket (your savings account), you refill it with earnings from the second and third buckets. While this method can be time consuming, it allows your savings to grow over time. You also gain more sense of control over your assets as you are constantly reviewing your funds.

Mix and Match

The above methods can be combined in various ways to determine the most advantageous income plan for your circumstances. As you contemplate what your primary expenses are most likely to be in retirement, you can mix and match investment strategies and fund your varied income needs separately. For help establishing a withdrawal strategy for your unique circumstances, the expertise of an advisory firm can assist in creating a plan for the best course of action.