8. Plan your withdrawal strategy
Once you retire, your focus may shift from saving to spending. A sustainable withdrawal strategy can help you avoid running out of money.
Tips for building a sustainable withdrawal plan:
Align withdrawals with your investment mix and market conditions.
Consider guaranteed income (like Social Security or annuities) to cover essentials.
Having accessible funds (cash, CDs, money markets) can help you avoid selling other investments during downturns.
Fidelity suggests a conservative drawdown rate—typically 4%–5% of your savings in year one, then adjust for inflation annually.
For example, if you’ve saved $1 million, a 4% withdrawal rate would mean taking $40,000 in year 1. In year 2, you’d increase that amount based on inflation to maintain your purchasing power.
When the market dips, it could make sense to rein in discretionary spending to limit withdrawals if your investments are down. “That’s why Fidelity suggests using guaranteed income for essentials. When discretionary expenses are covered by your portfolio, you may have more flexibility when it comes to adjusting your spending,” Davin says.
Read Fidelity Viewpoints: How to manage cash flow in retirement
Tip: Use Fidelity’s retirement planning tools to model different withdrawal scenarios and adjust your plan as needed. Try Fidelity’s Retirement calculator and tools.