The dilemma many investors face in retirement is how much money should they withdraw from their portfolios annually?

There are two goals that I believe they should try to meet in considering how much money they should withdraw from their portfolios every year:

1. The first goal most people try to achieve is adding enough income to their cash flow to meet their living expenses and/or other needs.

2. The second goal they should try to meet is having their portfolio's value keep up with inflation.

Both of these goals should help investors meet their income needs today and in the future.

If your portfolio's value can keep up with inflation, or exceed it, you should be able to increase your income along with the increase in the value of your investments.

I think it's important not to take out more than your planned withdrawals in years where your portfolio grows more than inflation. The reason for this is that the excess growth will help you in years where your portfolio has lost value. As we all know, investments do fluctuate over long periods of time.

I've always felt that a moderately invested portfolio can handle a withdrawal rate of up to six percent (6%) per year. In my 26 years in the financial planning business, I've had good success with people withdrawing up to 6% per year. Clearly, if you can take less, you leave yourself more room for increases in the future.

If your portfolio value is $300,000, you should be able to withdraw up to $18,000 per year, or $1,500 per month.

A moderate risk portfolio generally has investments in growth & income funds (blue chip stocks funds) and/or balanced or equity income funds (blue chip stocks and bonds). The common stocks have an inherent or intrinsic growth component to their make-up. This should help you achieve your goals of keeping up with inflation.

If your portfolio is made up of only bonds, you're ability to meet our two goals becomes almost non-existent. Bonds have no way to truly appreciate over the long term nor do most have any way to increase their income over long periods of time.

Planning for your retirement is tricky business. If you make a general rule of thumb for your portfolio to withdraw up to six percent per year from a moderately invested portfolio, you should have a reasonable chance of success throughout the years.

Please call if you have any questions or would like to discuss your retirement income needs.

Apprvd.BBDP