Finance 1. Fixed dollar withdrawals Perhaps the simplest withdrawal strategy is the fixed-dollar withdrawal. It works like this: prior to retirement, you determine a specific dollar amount of income that supports your lifestyle – your income in your final year of work, for example. Or, if you’ve paid off the mortgage, put the kids through school and don’t have a lot of debt, perhaps 70-80% of your final year’s income. Every year, you withdraw exactly that amount of money from your portfolio – no more, no less. In practice, however, many retirees adjust the amount annually to account for inflation, so the purchasing power of your retirement income doesn’t erode over time. While the simplicity of such a strategy is certainly appealing, the downside should be obvious. While you know how much money you have to spend each year, you often don’t know how long you’ll live. Can your portfolio sustain the same withdrawal rate every year if you live until age 90? Or 95? What about 100? How can you be sure? Six retirement withdrawal strategies you should know about How you take money out of your portfolio can have a big impact on your lifestyle By James Dolan The financial industry spends a lot of time suggesting ways in which Canadians should invest their retirement savings. However, they tend to be a lot quieter about how they should withdraw that money once they reach retirement age. And that’s too bad. Because finding the strategy that’s best suited to your lifestyle (and, just as important, to your emotional makeup) can make a big difference to ensuring that your retirement is long and financially comfortable. With that in mind, here’s a rundown of six retirement savings withdrawal strategies which you should know about, along with a brief review of the pros and cons of each. CSANews | SPRING 2016 | 25
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