Canadians all over the map on retirement withdrawal rates
It's no secret that most Canadians are unsure how much they should be saving for retirement.
But a new study by investment firm Edward Jones suggests we may be equally clueless about how much we can safely spend once we get there.
When asked what percentage of their savings they think they can afford to withdraw every year, only one-third (32%) appeared to have any realistic spending expectations.
According to the poll, almost half (49%) of respondents thought they would need to withdraw 6% to 20% of their savings each year, a number most planners would describe as "a bit high."
Alarmingly, one-in-five (19%) respondents thought they would withdraw more than 20% of their savings, a grim reminder that most workers either have no real idea of what it costs to spend 20 years in retirement or simply don't plan on being around for that long.
Although there's still debate about just how to figure things out, most planners use a 4% withdrawal as a general rule of thumb. Planning on more than that entails a fair amount of risk, something most retirees have little stomach for.
Rather than take out a steady 4%, many investors might stand a better chance of not running out of money were they to adopt a strategy where the percentage of withdrawals was designed to rise and fall between 2.5% and 5% of the prior year-end portfolio, depending on the market's ups and downs.
In other words: After a good year, take out more, and following a bad year, less -- not that's the easiest thing to do for retirees relying on savings to help pay the bills. But it is something to consider.
If they'd called, would you have been in the 6% to 20% range? If you're retired, do you any real-life experience to report?
By Gordon Powers, MSN Money