How much should I take from my investments?
It's a good question to ask, and an important one. Because how much you withdraw from your portfolio each year can play a big role in how long your money could last.
It's taken a lifetime of saving and investing to get to this point. So now what? How much money can you use from your investments to spend in retirement? It's an important question because how much you withdraw from your portfolio each year can play a big role in how long your money could last. We can help you find the answer.
Life wasn't predictable when you were working full time. That doesn't change in retirement. That's why we believe withdrawal rates (or how much you take from your investments each year) should be modest.
Adjust your strategy, if needed
Having a retirement income strategy can help give you an intangible, but critical resource – flexibility. This means you're better prepared to handle whatever life brings your way. Your Edward Jones financial advisor will talk with you to understand what you want to do and how much you want to spend. Then, you can work together to create a strategy that's specific to you.
Our guidance for withdrawal rates below can serve as a good starting point to determine if your expectations are realistic. This guidance assumes you'll spend a bit more each year to account for inflation, and that you'll live until at least age 90.
Initial withdrawal guidance
Age in retirement | More conservative | Less conservative |
|---|---|---|
| Early 60s | 3.0 % | 4.0 % |
| Late 60s | 3.5 % | 4.5 % |
| Early 70s | 4.0 % | 5.5 % |
| Late 70s | 5.0 % | 7.0 % |
| 80s+ | 6.0 % | 8.0 % |
Source: Edward Jones
Withdrawal rates can include the withdrawal of principal. If preservation of principal is a high priority, you will likely need to use a lower withdrawal rate. In general, the higher your withdrawal rate, the greater the risk that your money may not last throughout your time horizon. These are based on estimates and assume a 3.0% of annual inflation, a diversified portfolio - 50% equities, 50% income - and a life expectancy to at least age 90.
But a successful withdrawal strategy in retirement doesn't just mean sticking to a certain percentage. You'll probably need to make adjustments over time as your goals and income needs change, and that is where your Edward Jones financial advisor can help tailor this guidance to your specific situation.
Struggling for income? Steps to consider
If your retirement goals don't exactly align with what your investments can support, your Edward Jones financial advisor can help you determine if you need to make some adjustments, including cutting expenses, working part time or delaying retirement.
These adjustments may have other benefits, too. For example, delaying retirement may allow your investments to continue to grow and could increase your Canada Pension Plan/Quebec Pension Plan and Old Age Security benefits. Other options, such as immediate annuities, might help increase your cash flow and provide a floor to your income.
Be flexible over time
Market performance can be unpredictable, but you can prepare for it. Starting out with a modest withdrawal rate can provide you flexibility to better handle market declines and unexpected expenses, should they occur. But you may still need to make adjustments along the way to keep you on track during a market decline, such as:
- Determining where you can cut back on spending
- Not taking an annual “raise” (not automatically taking more from your investments each year for inflation)
How we can help
Talk to your Edward Jones financial advisor today about how you can create (or refine) your strategy to make sure your money lasts throughout retirement.