People save in retirement accounts so their nest eggs can last for the rest of their lives. These funds can help with living expenses while opening the door to some discretionary purchases, such as vacations and dining.
However, retirees have to balance the timing of retirement account withdrawals to ensure they enjoy their fortunes without running out of cash. Here are some of the details to consider as you assess if 2026 is finally the year to start tapping into your retirement savings.
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Review your monthly budget
Most retirees collect Social Security and may have other income sources, like a pension, that make it easier to cover expenses. Some people prefer the semi-retirement lifestyle and work part-time to provide added income.
If your income sources can cover your expenses, there isn't much reason to withdraw from your retirement accounts. The longer you let your portfolio remain undisturbed, the more likely your savings will outlive you.
However, retirees with multimillion-dollar nest eggs shouldn't have to struggle if their expenses barely exceed their income sources. In that scenario, it makes sense to withdraw some money from a retirement portfolio.
Traveling is easier in your 60s
Traveling gets harder as you get older. It can still be doable in your 70s if you maintain good physical fitness, but it gets a lot more difficult in your 80s. This timeline is important for retirees who want to visit bucket-list destinations after walking away from their careers.
It's better to make those types of trips in your 60s if you can afford to. Withdrawing money from your nest egg may make sense in this scenario since living expenses usually go down as you get older, especially if you maintain good health.
However, you shouldn't rush to go on a vacation binge the moment you retire. Some people get carried away and spend too much money in their first year of retirement.
The 4% withdrawal rule is a popular strategy to determine how much you should take out of your portfolio. It's up to you if you want to stretch the withdrawal rate to 5% or 6% in the first year because you want to travel. However, you should review your finances each year to ensure you aren't taking out too much.
Assess your age and portfolio
Personal finance is just that -- personal -- and your age and portfolio are two variables that significantly determine when and how much to take out from your retirement accounts. People who are older have more leeway.
A 75-year-old person typically will not live for as many more years as a 65 year old, giving the older retiree more flexibility with withdrawals. However, anyone who has less than $1 million saved up should be extra cautious about how much they withdraw.
Furthermore, people who have multimillion-dollar retirement portfolios have more resources to tap into for a vacation or another discretionary expense. You have to balance your needs and wants with knowing your financial situation. For some people, it makes a lot of sense to downsize and keep costs low, while others have enough to maintain high-end lifestyles.
Monitor how you feel
How do you feel when you think about withdrawing $5,000 from your nest egg, even as a one-time thing? Does it feel like you are setting yourself back or is it a small percentage of your total? Monitoring your emotions about withdrawing from your retirement portfolio can help you decide if 2026 is the right year for you.
Some retirees might go through this gut check and realize that a side hustle could be the right path for long-term financial stability. Others may be more comfortable with withdrawing more than $5,000 per month.
Each person has a different risk tolerance and financial situation. You can speak with a financial advisor if you aren't sure how to proceed. However, monitor your thinking and listen to your gut before making any big decisions with your nest egg.
