WITHDRAWAL RATES AND RETIREMENT

Entering the distribution part of your life requires finding a fine balance between how little you can withdraw from your retirement portfolio and still live comfortably, and how much you can withdraw and still have enough money to live on into your 80s and 90s.

Several factors can play an important role when calculating how much of your retirement money you will spend each year, referred to as your withdrawal rate.

First, consider your longevity.

According to 2005 Social Security figures, a 65-year-old man today can expect to live to until age 82, while a 65-year-old woman can expect to live until age 85.¹ You must factor in the possibility of funding 20 or more years in retirement when developing your retirement income plan.

You should also consider market conditions.

Investment portfolios don't return a pre-planned figure every year. They can go down as well as up—as recent years have clearly shown. If you experience a market downturn shortly after retirement, you'll be left with a reduced portfolio. If you then take money out at a rate that is too high, it seriously reduces your portfolio's power to recover when times improve.

Finally, don't overlook inflation.

Not many of today's investment portfolios generate seven percent on a regular basis. But what if your portfolio did grow seven percent every year, and you took that seven percent to live on?  The number of dollars in your investment portfolio would remain flat over time, but its purchasing power would be eroded by inflation.

While you have little control over market volatility and inflation, you can help protect your retirement security by wisely managing one fact you can control: your withdrawal rate. By withdrawing your income at a conservative rate early in your retirement, you may dramatically prolong the life of your retirement income—and you may even be able to raise your withdrawal rate later in retirement.

Withdrawal Rates: The Four Percent Ceiling

The risk of depleting your retirement assets while you're still alive rises steeply when your annual withdrawal rate goes above four percent. At that rate, a portfolio consisting of 50 percent stocks, 40 percent bonds and 10 percent short-term instruments would last for 33 years according to recent projections, taking the average retiree into his or her mid-90s. In comparison, a six percent withdrawal rate would exhaust such a portfolio in only 21 years, an eight percent rate in 15 years, and a 10 percent rate in as little as 11 years.²

Retirees who are well into retirement, and those whose portfolios have held up quite well, may decide a higher withdrawal rate is prudent. But if you are in the early years of retirement, you may want to consider preserving your retirement assets now in order to help minimize the risk of depleting them before you've depleted your retirement.

Talk to Wachovia

Understanding how withdrawal rates will affect your retirement is essential to putting together a retirement income plan that truly meets your needs. Few people approaching this exciting time in their lives have all the answers. Sitting down with a Wachovia Securities Financial Advisor can help you make more informed and realistic decisions about what lies ahead.

This material has been prepared or is distributed solely for informational purposes. Information has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed.



Wachovia Securities is the trade name used by two separate, registered broker-dealers and non-bank affiliates of Wachovia Corporation providing certain retail securities brokerage services: Wachovia Securities, LLC, Member NYSE/SIPC, and Wachovia Securities Financial Network, LLC, Member FINRA /SIPC.

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Wachovia Securities Statement of Financial Condition
Audited - December 31, 2007 
Unaudited - June 30, 2007 

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