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No one wants to run out of money before they die.
But making sure your nest egg will last is a challenge because you’re dealing with a lot of unknowns: How long will you live? Will you face costly health crises? How will the market and the economy perform while you’re in retirement?
That makes it difficult to figure out how much you can take every year from your portfolio and not outlive your money. But there are various rules of thumb to help you gauge a sustainable withdrawal rate.
These rules are typically derived from complex simulations based on historical returns, economic projections, and assumptions that you will live 30 years in retirement and have a balanced portfolio of either 50-50 or 60-40 stocks to bonds.
The end result should give you a very high probability (85% to 90%) that you won’t deplete your portfolio before you die. That means it won’t go to zero. But it also means…
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