Creating an adequate amount of income for individuals to live comfortably in retirement will require a combination of several income producing strategies, as well as knowing what constitutes realistic and “safe” withdrawal rates from retirement plans, according to a new issue brief by the Institutional Retirement Income Council. For individuals not to outlive their retirement funds, they need to treat their retirement plan account balances as a source of monthly income rather than as personal wealth, according to the report.
“Many retirees believe they can withdraw 10% or more of their retirement savings each year and still have enough money to last their lifetime,” says Fred Reish, an IRIC member and a partner at Drinker Biddle & Reath LLP, who co-authored the issue brief. “However, given the statistical chance that at least one spouse in a married couple age 65 will live another 30 years, ‘safe’ withdrawal rates are much less than most retirement plan participants think. In fact, anything greater than 6% results in a significant risk of exhausting retirement funds while the individual is still alive. This will be shocking to many participants.”
