Percent of Portfolio #
The percent of portfolio withdrawal strategy allows you to spend a constant percentage of your portfolio each year.
For example, you may choose to withdraw 4%
of whatever your portfolio is valued at each year. If your portfolio starts at $1,000,000
, then your first year withdrawal will be $40,000
. Later on, if your portfolio dips to $430,000
, your withdrawal for that year would be $17,200
.
Strengths #
- Never prematurely runs out of money
- Spending is adjusted based on market conditions
Weaknesses #
- High year-over-year variability in your withdrawals. When the market does poorly, your annual withdrawal may be quite small. And likewise, your withdrawals may grow sharply when the market does well.