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Make Your 401(k) Last In Retirement

If you're worried about outliving your retirement savings,
 consider this:  Don't withdraw more than 6 percent annually from your employer-sponsored 401(k) or 403(b) plan.  Take more than that and you could be tempting fate. That's the harsh conclusion from the Institutional Retirement Income Council, a nonprofit think tank that looked at several strategies for new retirees.

Determining how much retirees should withdraw from their retirement plans has been a favorite subject of debate among retirement planners. The council's 6 percent figure is at least more palatable than the frugal 4 percent withdrawal rate that's often recommended to keep retirees from going broke.
Many Americans, however, apparently have higher aspirations when it comes to living comfortably in retirement. A recent survey of 1,011 people found that more than one in five (22 percent) believe that they will need to take out more than 10 percent of their retirement savings each year. Of the retirees polled, 15 percent say they will need to withdraw more than 10 percent of their savings.

Fred Reish, a co-author of a brief for the council, says that taking "anything greater than 6 percent results in a significant risk of exhausting retirement funds while the individual is still alive."

Of married couples age 65 today, he says, it's probable that at least one spouse will live another 30 years to age 95.

His brief examines retirement strategies including:

â— Using all or part of the lump sum retirement savings to purchase an annuity.

â— Purchasing a guaranteed minimum withdrawal benefit, which allows a retiree to maintain some control of the retirement funds but also provides a guaranteed benefit.

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