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Subject:  Retirement Funding Date:  2/29/2012  10:51 AM
Author:  cummiw Number:  70243 of 88435

Much of what is written as advice to retirees and those planning their retirements ignores the unavoidable Required Minimum Distribution (RMD) law that does a pretty good job of determining how much to withdraw from one's traditional IRAs each year. For example at age 70, it demands that you withdraw 3.6%, 5.3% at 80, and 8.7% at 90. If you can adjust your lifestyle to survive on these amounts, and adjust your investments to produce them, you'll never run out of money.

To give a simple example, the RMD on a $1,000,000 IRA at age 70 will be $36000; by law you must withdraw at least that amount. If you can live on it plus Social Security and whatever else you have, and if you can earn $36000 by investing the 1 million in your IRA, you'll be in good financial shape. In later years, you may have trouble earning enough to cover the RMD as it increases, but you'll be closer to the end of life and can afford to dig into principal.

I found it helpful, as I saved for retirement, to estimate how much money I would need each year with no paycheck. This made it easy, based on the RMD table, to determine how much I'd have to save before I could retire, and therefore how long I would have to work to reach that goal. This has worked out well; I had to work to age 75 to get my number but now at 80, I have lived on my RMD for 5 years and have not reduced my principal.
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