How To Plan Actual Withdrawals From My Retirement Account
I'm trying to determine the actual amounts that I should plan to withdraw from my retirement accounts every year. Since your report calculates the withdrawals as constant amounts (considering inflation), does this mean that I should plan to increase the amounts of my actual withdrawals every year ... or does this mean that I should take out exactly the same amount every year. .... or if I run the report in January every year, will the withdrawal amounts be adjusted upward for inflation.
RSS
The withdrawals are reported in real terms, so in the absence of inflation you would, indeed, withdraw the same amount year after year.
Assuming that inflation stays at the historical 3%, then you can determine next year's withdrawal by multiplying next year's withdrawal by 1.03, the year after that by 1.03 * 1.03, then 1.03 * 1.03 * 1.03, ...
You should rerun your plans yearly with the appropriate changes in the actual numbers (retirement account balances, savings balances, portfolio balances, etc.) to determine the actual withdrawal for that year.
Remember that the suggestions from ESPlanner are, in my view, a ceiling on your consumption. Spend less than suggested and you have some insurance in the event of some form of shock in the future. Since we're in the process of living through one of these, enough said.
Best,
Dick Munroe