A common fear among investors is not running out of money as they age. For the very wealthy this means protecting capital, but for most people this means growing a portfolio at a reasonable rate and withdrawing just enough to live.

This begs a common question: What is a reasonable withdrawal rate?

The first question many retirees ask is how much money they can safely extract from their portfolio each year. The easiest way to express this is using a withdrawal rate, expressed as a percentage of your investment assets.

Our research and the research of others shows that withdrawal rates that could support an investor over a 30-year retirement have varied from 4% to 6%, depending on the asset allocation of the portfolio. You should revisit your retirement plan if you are withdrawing more than 6% annually. Most importantly, remember to measure how much you are withdrawing so you can analyze this withdrawal risk.

A broadly diversified investment strategy, similar to our University-style portfolios, can help investors meet their retirement income need and reduce the risk of running out of money.

Tags: Greg, Retirement, Income