Most Americans retire without a savings withdrawal plan

Almost two-thirds of Americans say they worry more about running out of money in retirement than about dying — and for many, that fear may become a reality.

According to a survey from retirement technology firm IRALogix, about half of America’s retirees don’t take any systematic approach to withdrawing their many billions of dollars in retirement assets. Only 22% of retirees follow any kind of plan, the survey found.

Having a plan is vital, especially if financial markets drop early in retirement, as pulling money during downturns can drain savings fast. Many older adults return to work when stocks fall and about 10% say they work in retirement out of financial necessity.

The New York Times reported that the 4% rule — which involves withdrawing 4% of a person’s savings in the first year of retirement and adjusting for inflation — has long been a go-to guideline for retirees. Introduced in 1994 by planner Bill Bengen, the method is based on market data showing that this approach would have lasted 30 years, weathering even tough stretches for the stock market.

While Bengen later upped this threshold to 4.5%, newer research suggests safer rates of 3.3% to 4%, depending on market conditions and portfolio mix.

Still, experts warn that sticking strictly to low withdrawal rates can lead retirees to unnecessarily cut back on spending during what should be their most enjoyable years. Spending often peaks in the early years of retirement and declines after age 80, so withdrawal rates should adjust over time.

A step recommended by IRALogix is for upcoming retirees to define their ideal retirement and the activities they want to do — whether it’s working part-time, volunteering, traveling or downsizing. Based on that answer, retirees should calculate their total fixed and required day-to-day living expenses, along with any reliable sources of income that can cover these costs — such as pensions and Social Security benefits.

Especially with Social Security payments and benefits in limbo, the calculation of living expenses may be a math equation the average retiree can’t solve, which means a financial professional may need to step in and assist.

Some annuities can help, the Times reported. Simple annuities are insurance products that guarantee a series of fixed payments in return for cash contributions, either deferred or from an immediate lump-sum payment. While they don’t adjust for inflation, options like inflation riders or buying during high-interest periods can help offset that.