Should Your Retirement-Portfolio Withdrawals Mirror Required Minimum Distributions?

Plus, what high inflation means for your portfolio and more. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=44496&elqTrackId=b655f957fb434707a98f867184459e42&elq=c10ec2989a4b4cb9800b050cbf3eb005&elqaid=44496&elqat=1&elqCampaignId=21577) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] Calculating a safe withdrawal rate for retirement is arguably the hardest problem in financial planning because you’re planning around such big unknowables, especially how long you’ll live and how the markets will behave over that unknowable time horizon. Withdrawal systems that are variable, with payouts fluctuating based on how your portfolio performs and/or how old you are, nicely help address those uncertainties. To boot, they also generally allow for higher starting and lifetime withdrawal amounts than is the case with withdrawal systems that target a fixed inflation-adjusted portfolio payout. But they’re not without caveats. Obviously, the flexible-spending retiree’s annual cash flows will bounce around from year to year. Portfolio balances also tend to be a bit lower after 30 years than is the case for retirees employing spending systems that target a more or less static payout. Jeff Ptak, John Rekenthaler, and I went deep on different retirement spending strategies in our 2022 “[State of Retirement Income]( research, and I focused on some of the [flexible strategies in an article last week](. This week, I delved into one of the simplest and most familiar methods for calculating portfolio withdrawals—[required minimum distributions](. I came away with the conclusion that it’s best suited for affluent retirees who are aiming to maximize consumption (and giving) during their lifetimes—in other words, a lot of our Morningstar.com readers! I also want to flag some [research that Jeff Ptak recently conducted]( about the virtues of doing, well, very little with your investments. The specific strategy that Jeff studied may not be simple to emulate, but the takeaways are clear: Trading less frequently and allowing your winners to ride are winning strategies. John Rekenthaler added some additional [conclusions here]( including the virtues of not chasing what’s in style. Finally, we’ve had a handful of repeat guests on The Long View podcast since we launched it four years ago, and [Jonathan Clements]( is one of them. He recently sat down with us to discuss his latest book, a compilation of essays called My Money Journey, and to share his own reflections from writing about and managing his money over the past three decades. As always, Jonathan dispensed plenty of wisdom and made us laugh, too. I think you’ll enjoy the conversation. With warm regards, Christine Benz [Should Your Retirement Withdrawals Mirror RMDs?]( Like all variable strategies, a required minimum distribution system entails trade-offs. [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [More Lessons From the Do Nothing Portfolio]( Success also comes to those who stand and wait. [Read More]( [What Beat the S&P 500 Over the Past Three Decades? Doing Nothing]( A strategy of buying a basket of stocks and leaving them untouched outperformed the index, not to mention scores of active managers. [Read More]( [Should You Be Worried About the Health of Social Security?]( Morningstar Investment Conference keynote speaker Mary Beth Franklin says it’s a good idea to be prepared with a backup plan. [Watch Now]( [Social Security Planning for Married Couples]( It can get more complicated when dual ages and earning histories come into play. [Watch Now]( [What High Inflation Means for Your Portfolio]( Continued higher inflation would have far-reaching implications for portfolio diversification, but there’s no need to panic. [Read More]( [Planning to Retire Soon? Flexibility and Spending Count]( Also, climate tech investing trends and Warner Bros. Discovery’s ‘strategic error’ with HBO Max. [Watch Now]( [Our Best Investment Portfolio Examples for Savers and Retirees]( This series of portfolios from Morningstar's director of personal finance Christine Benz can help investors reach their financial goals. [Read More]( [How to Convert a 529 Plan to a Roth IRA]( See if you’re eligible for this Secure 2.0 provision. [Read More]( [Jonathan Clements: ‘Humility Is a Hallmark of People Who Are Financially Successful’]( The author and columnist shares insights about rising interest rates and mortgage paydown, crypto and meme stocks, and his own financial journey and portfolio. 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