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Pension retirement withdrawal strategies.

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    IDEAS Pension retirement withdrawal strategies.

    Common Pension retirement withdrawal strategies. The amounts will vary according to how the value of your investments fluctuate from year to year and inflation.

    Dividends and capital gains are withdrawn under this rule.

    Many experts consider the 4% rate to be relatively safe since the regular withdrawals have an element of dividends and capital gains in them. After the 2008 recession, fewer advisors suggest the 4% retirement withdrawal strategy

    Pros of the 4% retirement withdrawal strategy
    • The retiree is guaranteed steady funds after retirement. • The 4% rule also assists with retirement
    Cons of the 4% retirement withdrawal strategy
    • The rule can be restricting if 4% isn’t enough to sustain your standard of living.
    • Bear markets just prior to retirement or shortly after retirement can have a damaging
    effect on this strategy.
    • The experiments used only a withdrawal period of 30 years. • withdrawal is adjusted for inflation, more likely to run out of money if inflation rises significantly.

    ERW #2: 2% to 3% Rule Like the 4% thumb rule, withdraw funds at a lower rate of 2% to 3%. Dividends and capital gains under this rule can also be withdrawn and treated as explained under the 4% Rule.

    A 2015 study published by Morningstar and written by 3 retirement specialists, David Blanchett, Michael Finke, and Wade D. Pfau compared the 4% and 2% rules.

    They concluded a 2% retirement withdrawal strategy was more realistic because:

    1. More current model that considered lower interest rates and high stock valuations.

    2. Factored in wealth management fees.

    3. withdrawal period of 40 years as compared to 30 for the
    4% retirement withdrawal strategy.

    4. It’s no doubt retirees face unusually high valuation returns risk near the end of bull markets. The study adequately accounted for the heightened sequence of returns risk. $1,000,000 x 3% annual withdrawal $30,000.

    The 2-3% Retirement Withdrawal Strategy

    Pros of the 3% Retirement Withdrawal Strategy
    - The rule is more realistic in terms of life expectancy after retirement. 40 years vs 30 years by the 4% rule.
    • Reflects more current economic times.
    • Considered that you may need the services of a professional.

    Cons of the 3% Retirement Withdrawal Strategy
    • You only get 3% of your portfolio to live
    The cons with the 4% retirement withdrawal strategy also apply here.

    Well the strategy maybe of great help for some pensioners that have good financial status. They were able to reserved some amount and the succeeding amount of pension. I understand the concept of saving and being thrifty. However, it doesn't apply to the general view of pensioners. Mostly of them doesn't have enough amount to sustain their expenses. I've known several professional retiree who were not able to received their retirement pay in full amount because it was deducted with their previous loans. I think there's a whole difference between a needy and not. The idea also of expenses should not exceed with the earnings is not practice in general. Mostly are extravagant.


      I read your post on pension withdrawal strategy. You provided a simplified explanation on 4%, 3% and 2% rate of withdrawal strategy. However i agree with Jelineex comment that it is best for people with good financial status rather than general public.
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