According to a study of retirement withdrawal strategies, one of the more popular retirement drawdown methods is often the least-efficient way to go to maximize lifetime income for a retiree, while a simple rule used by the Internal Revenue Service works quite well.
The report, “Optimal Withdrawal Strategy for Retirement Income Portfolios,” conducted by Morningstar, measured five different drawdown strategies in various case studies. The real lesson from the analysis is that plans that dynamically adjust for changes in both market and longevity beat more traditional methods. It also concluded that investors should reevaluate how much to withdraw every year based on these two variables. A sophisticated simulation that takes both variables into account and is run every year is best.
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