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There is no doubt that Social Security and some old fashioned pension schemes will provide some sort of income after retirement by building up your nest egg is important.
This means, that you should have a formula for withdrawing money from your retirement savings so that the withdrawals do not eat into your retirement funds.
Earlier many people used project what they expected their retirement portfolio to earn each year and then reinvest some of the money and withdraw the balance. However, this formula does not take into account the bull market and bear market, and above all it does not take into account that timing which is crucial for making money for retirement. If your portfolio runs into a bear market, it will go dramatically down in value.
Therefore, the formula for withdrawing money from retirement savings means scaling back on your spending to protect yourself. You should have a sustainable withdrawal rate which should not be more than 4 to 5 percent of the initial value of the account, and you can add the adjustments for inflation.
However, you will have to ask yourself whether you can live on 4 percent of your assets. If not, you will have to take steps to ramp up your savings. Many people are of the opinion that timing for saving for retirement does not matter as most retirement saving portfolio are in buy-and-hold mode. This means that good years and bad ones will not really affect them to a great extent. However, if you withdraw money when bad years hit your portfolio, it could have a negative effect.
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