Is it Okay to Withdraw Money From Your
Retirement Bucket™ Right Now?
Dear Relaxing Retirement Member,
One of the questions I’ve heard more than once during the market correction we’ve experienced over the last few months is, “given the market, is this a bad time to be taking money out?”
Or, even better, from a member who is not withdrawing funds from his Retirement Bucket™ yet, “I’m sure glad I’m not taking withdrawals yet.”
The answer to these concerns is Principle and Guideline #3 which I want to share with you today.
Over the last few weeks, we’ve dissected The Relaxing Retirement Formula™, and most recently began to answer the final question which is where do you position your Retirement Bucket™ to produce the long term rate of return you need to earn while experiencing acceptable levels of volatility and paying less taxes to the government?
Principle and Guideline #1 was knowing what NOT to invest, i.e. the amount you will be spending in the short run, and getting comfortable with the idea that not every dollar you have should be invested to earn top returns.
Principle and Guideline #2 was developing your answer to THE question: Once you have set aside funds to support multiple years of your anticipated future withdrawals in money markets and short term instruments, what percentage of your Retirement Bucket™ will you invest in ownership shares of quality companies (stocks) vs. fixed income investments (bonds, money markets, CDs, and fixed annuities)? And, then, more specifically, what percentage of the equity holdings in your Retirement Bucket™ do you need to subject to different asset classes?
Now that we’re comfortable with the first two, let’s jump into Principle and Guideline #3 which pulls #1 and #2 together:
Withdraw Funds For Your Spending Needs Directly From Money Market Funds You’ve Already Set Aside, NOT By Having To Sell Investments
The first point I’d like to convey is that this will not work for you unless you’ve carefully followed each step in The Relaxing Retirement Formula™ so far.
It will seem foreign and counterintuitive to you.
However, if you have, then you already know the amount of money you need to withdraw from your Retirement Bucket™ each year, and you’ve plotted out the amount you’ll need to withdraw over the next 5 years (at least).
If you’ve done this, and you’ve applied Principles #1 and #2, then you can confidently invest the rest.
What makes us fear a down market is being forced to sell at the wrong time, i.e. when the price of your equity holdings are down.
This is why I received the question, “given the market, is this a bad time to be taking money out?”
The answer to the question is NO!
If you follow this principle, and you carefully allocate money in short term instruments to support your withdrawal needs, you can confidently invest the rest like a pro knowing that you won’t be forced to sell equity investments to support your income needs when market prices are lower than you’d like.
You will already have the amount of money you need set aside.
Equally important is that it provides you an opportunity to buy more equity shares at a lower price to rebalance back to the ratio you want.
What this allows you to do is confidently spend what you want, and what you planned for while you allow your inflation fighting equity investments to do their job in the long run.
This is the key to successful investing during your retirement years.
Don’t underestimate just how important this is, especially when the overwhelming majority of retirees panic and feel as though they “have” to sell during normal market corrections like we just experienced.
Committed to Your Relaxing Retirement,
The Retirement Coach
P.S.: WHO do you know who could benefit from receiving my Retirement Coach “Strategy of the Week”? Please simply provide their name and email address to us at info@TheRetirementCoach.com. Or they can subscribe at www.TheRetirementCoach.com.
I appreciate the trust you place in me. Thank you!
(The content of this letter does not constitute a tax opinion. Always consult with a competent tax professional service provider for advic