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We have $2 million for retirement and want to spend every single dollar before we die


Dear MarketWatch, 

My wife (63) and I (70) are retired and have no children. Our total assets are $2 million.  We have $1.35 million in equities ($1 million in an IRA and $350,000 in a taxable account) and $600,000 in our fully-owned mortgage free home. I receive $22,000 annually in Social Security. 

And because we do not have children, we would like to fully enjoy our retirement funds during retirement rather than leaving any of our assets before we both die. 

My question is about the percentage withdrawal rule and how this applies to our desires to use our funds rather than leave them behind. Everything I read about the (4% or 5%) rule refers to retaining a portion of your funds at the end of one’s life.

Can you help us please understand what would be a better withdrawal figure for us considering our particular situation?

See: My 57-year-old husband works three shifts and is ‘burned out’ — can he retire?

Dear reader,

Lots of people say it — you can’t take the money with you when you’re gone. But your goal might be a tough one to accomplish. 

Hitting a $0 balance is a very hard target, mostly because there’s no way to know for certain when you’ll die. You could get awfully close or you could fall under zero, which could be quite a problem. Getting there will require being extremely attentive to your assets, your spending and your portfolio balances. Your withdrawal rate matters, but as you have probably seen from your own research, they really are just estimates at the end of the day. 

The 4% rule, for example, has been widely contested in recent years. Experts say it actually takes too much out of the portfolio. (For others, it may not be enough, but that depends on lifestyle and the amount in assets, of course.) Morningstar estimates an investor need only use a 3.3% withdrawal rate, assuming a balanced portfolio and fixed withdrawals over 30 years, to ensure someone can use their assets without running out of money. 

Instead of focusing and committing to one withdrawal rate, you might want to take a more hands-on approach. One option is the dynamic withdrawal rate approach, which is where you increase or decrease spending depending on portfolio growth and declines, said Adam Wojtkowski, a certified financial planner at Copper Beech Wealth Management. “For someone looking to spend all of their assets, the ability to see larger distributions during good times allows them to spend and enjoy their funds, with less of a concern around running out of money at some point,” he said. If you go the do-it-yourself way, you could try using an Excel spreadsheet of your assets that you update regularly, so that you can see where your balance is and how comfortable you are with that. 

You should likely err on the side of caution and aim to have at least a little money left over. Worst case scenario if you have money left over you didn’t get to spend, you can have it go toward a worthy cause. 

Also see: Assisted living would cost $100,000 a year where we live. We’re almost in our 60s, should we get long-term-care insurance? 

Wanting to leave nothing behind isn’t the worst idea, but you don’t want to get to the point where you’ve depleted your assets and one of you is still alive. There are so many expenses in retirement, and it can become a dire situation quickly. Healthcare alone is so expensive, especially as one ages.  

Ask yourself some questions about what hitting $0 while one of you is still alive would look like. Social Security might help you, but would it be enough? And Medicaid might be available to help with healthcare, but is that something you’re willing to rely on? Would you have to sell your home, and if so, where would either of you go? These might seem like dramatic questions to ask, but you always want to be five steps ahead, especially when your nest egg is slowly being depleted. 

A financial planner can help you get a bit more granular about your spending and withdrawal approach, especially if you intend for it to fluctuate over time. They’ll be able to help you by suggesting to reign in the spending when you are overdoing it, and by managing your investments and other retirement income over the course of your lifetimes. I suggest you reach out to a qualified financial planner who will work in your best interest (quick tip: ask them if they are fiduciaries, among other questions), and look closely at your personal finances together.  

Readers: Do you have suggestions for this reader? Add them in the comments below.

Have a question about your own retirement savings? Email us at [email protected]



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