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How to make your money last

By Judy Martel · Bankrate.com
Wednesday, April 13, 2011
Posted: 2 pm ET

The big question most people have, after they've figured out how to make money, is how to keep it through retirement, and beyond.

The answers vary, and rules of thumb are constantly being called into question. For instance, what percentage should you withdraw during retirement to ensure it supports you for your lifetime, with maybe some left over for your heirs: 3 percent? 5 percent? 7 percent?

According to financial planners, 3 percent to 5 percent has been the accepted range, but the problem with any sort of "rule" is that people tend to want to follow it, feel safe, and stop thinking about it. But if you blindly continue to withdraw 5 percent in retirement income during an economic downturn, you could jeopardize your pot of money. You don't want to be pulling income out as your portfolio's value falls -- you'll be multiplying losses at a fast rate. Instead, flexibility should be the rule of thumb. Once you've stopped earning income from a career and have to depend on your accumulated wealth, it needs to be treated with care.

There are various ways to tap into retirement income, but it makes sense to monitor your investment returns, interest rates and current inflation to determine whether you can take out the same percentage year after year. If your target withdrawal rate, based on your income needs, is 3 percent per year, then in a down year, for example, you might reduce your withdrawal to 2 percent. Then make up for it in a better year with a 4 percent withdrawal rate, and stockpile some of the excess withdrawals in a liquid investment to help you through the next downturn. But you won't know to do any of that if you don't pay attention.

These calculators can help with determining your retirement income needs:

Social Security Income calculator

Retirement income calculator

Annuity calculator

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