Systematic withdrawals

Disciplined investors may be able to gradually draw down their savings in such a way that it is likely to last as long as they live. Many financial advisers recommend withdrawing no more than about 3 or 4 percent of your retirement savings, perhaps adjusted for inflation, each year. This strategy carries the risks that your investments could perform poorly, that you will live longer than expected, or that you will simply fail to stick to the plan and spend more than you should. However, that money will be available to you to use for emergencies, such as medical bills or home repairs. And if you end up dying sooner than expected, your heirs will get the money. If you are an especially gifted investor, you'll also get to keep your investment gains. "With a systematic withdrawal scheme, if you live a long time or have a poor investment experience, you might run out of money or you might pass away before you run out of money and have a lot of money left to leave to your heirs or charity," says Vernon. "Looking forward, we may not have the interest rates to support the 4 percent rule. We're moving toward 3.5 or 3 percent as a safer withdrawal rate."