How much to withdraw from your retirement fund?

Now that you work hard and saved for your retirement, here comes a big decision. How much you can withdraw every month from your 401(k) or 457 retirement plan?

Conventional wisdom says that you can withdraw 3% to 5% from your fund. Some even suggest withdrawing 4% a year. But you need to consider several factors before you decide on an amount.

Look at the total available amount in your retirement fund. Yes, it is going to earn interest and based on your allocation your available balance may appreciate or decrease. Also, keep in mind that the inflation may require you to withdraw more or less over time. So, don’t withdraw an amount that is going to deplete the account long before your death.

Consider how long you can expect to live. There are lots of ways to calculate your life expectancy and calculators are available online. On average, you can expect to live 20 – 30 years after you retire at the age of 65.

Consider the method of withdrawal. If you withdraw a lump sum at the begging of the year, that money is not there anymore to earn an interest. Withdrawing an equal amount every month may work for you.