Avoid running out of money in retirement

Set upper and lower limits for withdrawals
Set upper and lower limits for withdrawals © Nicholas Rjabow/

Mutual fund giant Vanguard's dynamic approach to portfolio withdrawals is based on a combination of two tactics: a) starting off with a specific dollar-amount withdrawal and adjusting it for inflation each year, and b) withdrawing a specific percentage of your portfolio annually.

In what Vanguard calls a "ceiling and floor" approach, the fund company says you could withdraw a specific percentage of your portfolio each year, setting upper limits, or a ceiling, and lower limits, or a floor, based on what you spent in the previous year.

If you find that your defined withdrawal would result in an amount that's, say, higher than a ceiling of 5 percent more than your prior year's withdrawal, then you would withdraw only up to the ceiling amount. Similarly, if you find that the defined withdrawal amount falls below a minimum floor you set, then you would withdraw at least the floor amount.

For example, you withdrew $30,000 from your portfolio in 2013 and find that your 2014 withdrawal would be $30,300 based on a 1 percent rate of inflation. Instead of going with this defined withdrawal, you would instead, based on a 2.5 percent floor, withdraw $30,750, hiking up the 2013 withdrawal by 2.5 percent.


Show Bankrate's community sharing policy
          Connect with us

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.


Jennie Phipps

Luxury loans for the well-heeled

Personal loans are making a comeback -- especially for those who have good credit and a big back account.  ... Read more

Partner Center

Connect with us