Planning for retirement spending is more complex than figuring how much you want to (or are able to) spend each year.
Much thought and effort goes into building up a nest egg and preparing financially to retire, but exactly how we’ll use those assets to support our lifestyle in retirement doesn’t get as much attention.
There is no one-size-fits-all plan, but we can use some general principles to help guide our decision-making when it comes to accessing money to meet our retirement spending needs.
The first is cash flow. If you have steady, reliable income sources, this is money that you can spend.
If you only spend a small fraction of it each year, the odds are decent that the pile will grow by more than you’re taking out, and the odds are extremely good that the pile won’t be depleted in your lifetime.
It’s important to understand that the safe withdrawal rate studies look at the total return from stocks and bonds, and that return includes the cash flow from dividend payments and any withdrawals you might take as RMDs.