One major goal for retirement is to avoid running out of money while covering living costs, especially for healthcare.
In the past, financial planners have suggested that retirees avoid taking out more than 4 percent of their total nest egg a year to ensure they don’t outlive their savings. That means a person with $100,000 in the bank shouldn’t withdraw more than $4,000 a year, while also relying on Social Security, pension disbursements, asset sales, charity or even a prolonged career.
The problem with the 4 percent rule is that it was cooked up 20 years ago when bond yields were higher, ensuring a steady cash flow. The rules are now changing, writes Rodney Brookes in the Washington Post.
“Many planners still use it as a rule of thumb, but if anything, many recommend that you withdraw less — more like 2 or 3 percent,” Brooks writes. “The reason is longevity. We are living longer. In fact, you can now live in retirement longer than you did in your career.”
Retirees with adequate Social Security or pension income may be able to avoid annual withdrawals from a nest egg.
“Today, four percent needs to be the highest level they are pulling,” financial adviser David Blackston told the newspaper. “No more than that. So is it still effective? Yes. It’s on the high side, but it depends on what the client is trying to accomplish.”
Newsmax Finance Insider Charles Sizemore told Newsmax TV that "it’s worth stuffing every single dime you can into your 401(k) plan."
“The benefit of a 401(k) plan is that even if you’re a little bit wary of the stock market, it’s still a very good option because of the tax break and because of the matching (contribution by your company),” Sizemore told Newsmax Prime’s JD Hayworth.
“So, if your employer matches you 3 to 5 percent, that’s great. On that first 3 to 5 percent, you’re getting 100 percent return just on the matching alone, but the tax break is really the big deal," he said.
Sizemore, chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog, explained that amid such financial uncertainty, savvy investors can only benefit by essentially bulking up their war chest: in most Americans’ cases, that means their 401(k).
Sizemore urged that the intelligent investment move with any extra cash you may have is to sock it away in your 401(k), reinforcing the theme of his recent Newsmax Finance blog.
"If you’re maxing out the 401(k), if you’re putting in the full $18,000 a year, or if you’re age 50 or older, you’re putting in $24,000 a year, and you’re in a high tax bracket, you could be making 30 percent or more just in tax benefits," he said.
"So even if the stock market doesn’t go up a single penny, it’s worth stuffing every single dime you can into your 401(k) plan just to get the tax benefit, of nothing else,” he said.
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