When you retire, how much money can you take off of your investments and not run out of money?
Most financial advisers recommend that you can take 4% from your investments.
According to Morningstar, if you’ve got 50% bonds and 50% stocks (a common retiree mix) and you take 4% off, you have a 97% chance of not running out of money.
If you bumped that up to 5%, your odds of running out of money increase to 83%. That’s why most advisers recommend being between 4% and 5%.
If you hit higher levels, then your odds of keeping your money really drop. 6% means you have a 57% probability of your money lasting 25 years. 7% means that you got less than a one third chance of having your money last 25 years.
4% is the sweet spot to make your retirement money last.