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The 4% retirement rule is just a starting point

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The 4% retirement rule is just a starting point
The 4% withdrawal rule can be a good starting point in retirement planning, but clients should consider other strategies for drawing income from their portfolio in retirement, writes an expert on The Wall Street Journal." The 4% withdrawal became popular in the 1990s, but the researcher and financial planner who created it, William Bengen, never claimed his findings are right for every retiree, this article says. Instead, he started with a specific set of assumptions: a retirement lasting 30 years with savings in a tax-deferred account and nothing left for heirs. Change just one of those parameters, and your “safe” withdrawal rate may differ. So depending on your circumstances (the size of your savings, investment fees, other sources of income, your life expectancy, spending patterns, etc.), you might be comfortable with a withdrawal rate of, say, 4.5%—or something closer to 3%," explains the expert. "Of course, the lower your withdrawal rate, the safer."

Opinion: You’re probably going to need a lot more than you think to retire
A study by the Duke University Center for Advanced Hindsight has found that seniors need to replace more than 70% of their preretirement income to maintain their lifestyle in the golden years, according to this article on MarketWatch. Some financial advisors agree to the findings. “In our experience, clients often spend up to 50% more in their early years of retirement when compared with the preretirement spending estimate. Nearly all of our retirees seem to spend at least a little more than they predict and almost none spend less than they predict during the first several years of retirement,” says a wealth advisor.

What makes an investment right or wrong for your IRA?
IRAs are tax-advantaged retirement savings vehicles that allow clients to invest in stocks, bonds and other publicly traded securities to curb exposure to risk, according to this article from Kiplinger. Clients may opt for a self-directed IRA, meaning they are responsible for all investing decisions. However, there are certain restrictions and prohibitions, and expert guidance is recommended to avoid wrong, costly moves.

Where to invest a 401(k) or a brokerage account?
Younger workers should contribute to their 401(k)s enough to get their employer's matching contributions to avoid leaving free money on the table, according to this Q&A article on personal finance website Motley Fool. After doing this, they should consider directing extra funds to a Roth IRA before finally investing in a brokerage account. A Roth IRA is funded with after-tax dollars but offers tax-free growth on savings and tax-free withdrawals. It also gives more flexibility when drawing income in retirement.

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