2. Be prepared to roll with the punches.
Once you’ve settled on a withdrawal regimen, you need to stay flexible about tweaking it in response to changing market conditions. For example, if the stock market experiences a major setback, the combination of investment losses and the money you draw from savings withdrawals could so deplete your nest egg that you may run through it much more quickly. So in such a case, you may want to scale back withdrawals for a year or so to give your portfolio a chance to recover. Conversely, if the market goes on a tear and the value of your nest egg soars, you may want to take the opportunity to indulge yourself and boost withdrawals a bit to avoid ending up with a huge stash of cash late in life when you may not be able to enjoy it as much.
To determine whether you should trim or boost the amount you pull from savings, plug information such as your nest egg’s current value and your planned level of withdrawals into a retirement income calculator that estimates the chances your savings will be able to support you for life. If the outlook has deteriorated since the last time you did this assessment, then you may want to pare withdrawals a bit. If the chances have increased, then you might consider upping your withdrawal. The point, though, is that by making small adjustments every year or so, you’ll be less likely to end up with too little (or too much) money late in retirement when your options are more limited.