Percent of Portfolio

The percent of portfolio withdrawal strategy allows you to spend a constant percentage of your portfolio each year.

For example, you may choose to withdraw 4% of whatever your portfolio is valued at each year. If your portfolio starts at $1,000,000, then your first year withdrawal will be $40,000. Later on, if your portfolio dips to $430,000, your withdrawal for that year would be $17,200.

Strengths

  • Never prematurely runs out of money
  • Spending is adjusted based on market conditions

Weaknesses

  • High year-over-year variability in your withdrawals. When the market does poorly, your annual withdrawal may be quite small. And likewise, your withdrawals may grow sharply when the market does well.