Traverse City Record-Eagle


April 2, 2014

Jason Tank: What is a safe spending rate for retirees?

Welcome to the Record-Eagle’s “Your Money” financial advice column. Your questions are highly encouraged. To get an answer to your own question, just submit it to me by visiting

To kick off this column, your questions alone can only tell me so much about your situation and my answers will naturally assume some general details about you in order to be of help to other readers. You should always exercise common sense in seeking personalized advice before taking action based solely on my answers.

Q: My husband and I have entered the “on ramp” to retirement within the next few years. We’re hearing different things about the right amount we should be able to spend from our investments and still have it last for the duration. What amount is considered safe?

A: As a general rule of thumb, the withdrawal rate I prefer is to spend only 3% to 4% of your total retirement savings each year. But, this recommended level assumes you’d like to have your retirement savings keep up with inflation and not dwindle down over time.

If you are content with steadily spending down your portfolio and leaving less behind, then you might be able to increase your spending rate a bit above that level.

How much above? Well, to help people mentally establish an upper limit, I like to show the level of payment an insurance company is willing to promise when you buy an annuity. Under this deal, you give the insurance company your money and they promise to pay you a fixed monthly amount for the rest of your life. They won’t give you a raise and you lose a lot of access to your money. And, when you pass away, your loved ones often get none of the leftover money.

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