Two of the first and most important decisions to make are:

  1. How much to withdraw annually from your nest egg
  2. What accounts to draw from

The withdrawal percentage depends on how much you've saved, the investments you are using, your age and other factors. Retirees who withdraw at higher rates should be prepared to immediately cut back should their accounts suffer from a significant market downturn, or should their personal circumstances change for the worse.

In addition, consider putting enough money into a liquid money market account to cover your withdrawal needs for at least a year, maybe more, so you don't have to take money out of your investments when the market is adjusting downward.

Which Accounts Do You Draw From?

The general advice is to first take money out of taxable accounts in order to keep assets in retirement accounts growing tax-deferred. This may involve some reallocation of your investments.

Once you reach 70 1/2, your choices are further complicated because you're required to start minimum distributions from your IRAs and retirement plans (except for a plan run by your employer, where you own less than five percent).

Investment Decisions

You'll probably want to be more conservative than before retirement, yet that does not mean abandoning stocks. With potentially 20 or more years in retirement, inflation can eat away at lower returning assets.

Planners may recommend that the portfolio hold at least two to three years of living expenses in cash, CDs and short-term bonds that can see you through a stock market decline. Beyond that, there is no special rule of thumb for allocation of stocks, bonds, cash, and other assets. It all depends on your other sources of income, risk tolerance, age, financial goals, living expenses and so on.

Non-financial Concerns

You may need or want to adjust your lifestyle. Is retirement turning out as you envisioned? It's common today for retirees to return to work-perhaps out of financial necessity, but also for something stimulating to do.


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