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Part 1: A little withdrawal Q&A

Before you start to calculate your own safe withdrawal rate, get a little more intimate with the subject by playing with some calculators and answering the homework questions.

Determine your "safe" retirement withdrawal rate and list the actions you must take to meet that expectation in your workbook. Ask yourself the following questions as you go along:

• What's more important to you, making sure that your portfolio survives your annual distributions over your entire life, or taking the largest distributions you reasonably can knowing that doing so increases your chances of running out of money?
  
  
• Do you see yourself ever taking more money in "good" investment years and cutting back your income in "bad" years?
  
  
• What's the risk to you of staying at a 100% "safe" level of annual withdrawals? What's the risk to your potential heirs?

You might want to take a look at this Roadmap to Retirement alumnus' introspection on the Retirement Realities board before you get started. 

Extra Tips
As you develop this withdrawal rate, understand that, in general, the higher the rate you set, then the greater the chance that your retirement portfolio will not last as long as you do. Sorry about the bad news.

Additionally, the longer you expect to draw from that portfolio, the lower that rate must be to make sure it lasts throughout your retirement. This is the price you pay for retiring early and living longer.

Establish the probability of success you will accept, keeping in mind that a 100% probability of success reduces the amount of your withdrawals.

You'll find these resources listed on the seminar resource sheet, but use the following Lesson Resources to help you decide your safe withdrawal rate:

• Check out the Trinity Study by Scott Burns and
  
  
• John Greaney's (known in Fooldom as Intercst) Retire Early website article, "What's the 'Safe' Withdrawal Rate in Retirement?"
  
  
• John also has two useful calculators to help you make this decision, the Millennium Edition Safe Withdrawal Calculator and another withdrawal strategy called the Pay Out Period Reset method.
  
  
• For the Big Spenders among us: For $500, T. Rowe Price offers its Retirement Income Manager, a proprietary calculation program designed to offer a recommended investment and withdrawal strategy in retirement.

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