Retirement plan decisions made easy
How Much Should I Take Out of My 401k?
The minimum amount that you must take out of your 401k is different than the amount that you should take out of your 401k. (For information on required minimum distributions, check out the drill down, "Minimum Required Distributions" from our online course, The ABCs of Your 401k.)
The Goal of Taking Money Out of Your 401k
The amount that you should take out of your 401k typically reflects an important goal: stretching your money out for the rest of your life. The simple approach is to use average investment returns and average life expectancy. Then its simple arithmetic to find the amount you can take out every year.
Rule of Thumb for Taking money out of your 401k
Unfortunately, you may not be average. You may live longer than average, and your future investment returns may be less than average. Bummer. Based on numerous simulations of possible investment returns, and the fact that more and more people are living to very old ages, we recommend that you pull out no more than three percent of your 401k balance when you begin retirement. Then increase that amount every year to keep up with inflation.
More information is available in the drill down section, "How Much Should You Take out of your 401k?" from our online course, The ABCs of Your 401k.
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