Take It Right

Retirement distribution strategies that will make your money last

Saving as much as possible for retirement is only one part of a successful golden years experience. The other part is knowing how to take distributions from your retirement accounts so that your money lasts. Here are some tips to make that happen.

Go Simple

One way to take distributions is to set a specific amount and withdraw that each and every year. You might prefer this method because of its simplicity, but keep in mind that taking a fixed amount could leave you vulnerable to market downturns.

Do the 4

One of the more popular retirement distribution strategies is what’s called the 4% rule. This involves you withdrawing 4% of your funds the first year of retirement, then taking inflation-adjusted withdrawals for the rest of the years. The dollar amount increase each year to cover the cost of living also rising.

Bucket It

Another method for retirement distributions is the bucket strategy. This allows you to use some money in the short-term while keeping other money invested for the long-term. You could use one bucket for money you’d want during the first three years. This would be kept in cash or bonds, keeping it relatively stable. The second bucket would be money you’d want to access in three to 10 years. Those funds would be kept in a mix of stocks and bonds so it can grow. In the third bucket, you’d keep funds you won’t need for 10 or more years. Those funds would be invested a bit more aggressively.

Try Account Sequencing

Taking retirement distributions is all about making the most out of your money. With that in mind, you might want to just think of it in terms of account sequencing. As US News reports, this is just a term for withdrawing funds in the order that minimizes taxes and allows money to grow in the long-term. Retirement is not a short-term thing. Your distribution strategy should reflect that.

Chris O'Shea

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