Retire Smart: Reader Mailbag: How to Draw Down Savings in Retirement 9-4
Saturday, March 13, 2010
By Mark Miller
Tribune Media Services
Q: It's been suggested that I withdraw about 4 percent of my retirement savings ($430,000) each year in addition to my current income of approximately $3,000 per month. I am 70 and my wife will turn 64 this year. We have no mortgage payments, although we do have a $550 monthly car payment for the next five years. Does 4 percent sound about right? - R.B., via the Internet
A. The aim of withdrawal guidelines is to to help make your money last through a retirement that could last a long time-perhaps to age 95, says Stuart Ritter, a financial planner in T. Rowe Price's Financial Planning Services Group. But Ritter cautions that you also need to build in increases in withdrawals over time for inflation. 
"For a couple each age 65 (i.e., your approximate average age), consider withdrawing 4 percent of your balance the first year, and increasing that initial dollar amount by 3 percent each subsequent year to help keep up with inflation. So it's not 4 percent 'each year'-it's 4 percent the first year, with a 3 percent 'raise' for all the future years."
"For example, 4 percent of $430,000 is about $17,000. Next year, you'd increase that by 3 percent and withdraw about $17,500, helping you still buy all the things you bought this year, but have gone up in price. The year after, you'd increase by 3 percent again to get $18,000, and so on. This helps you keep up with the rising cost of your lifestyle (to buy a car 20 years from now - at a 3 percent inflation rate - you'd have to almost double the amount you withdraw to buy it!)."
T. Rowe Price offers a free retirement income calculator at The American Institute of Certified Public Accountants also has a good planning tool, which can be found at 
Q: I receive Social Security Disability and Medicaid, SSI & Medicare. I am 58, female and live in Alaska. What happens to my Medicaid when I reach (Social Security) Full Retirement Age? - M.M., via the Internet
A: As with most legal questions, the answer is: it depends. "If your full retirement benefit replaces your SSI, then you will lose automatic eligibility for Medicaid," says Harry S. Margolis, founder and president of ElderLawAnswers ( and a principal of the Boston elder law firm of Margolis & Bloom, LLP.  "However, depending on your state's eligibility limits there's still a good chance that you would be eligible. You would just have to apply separately for Medicaid. On the other hand, if your full retirement benefit is not so high that it replaces SSI, then your situation will be unchanged."
Q: I'm going into retirement this year at age 62 and wonder if I should apply for benefits or wait a while? My wife will retire next January at age 62. Should she wait as well to apply for benefits? I am 10 percent disabled from the military and would this qualify me for extra benefits? How far in advance of the retirement date should we apply for Social Security? - L.M., via the Internet
A: Social Security pays benefits to people who cannot work because they have a medical condition that is expected to last at least one year or result in death. While some programs give money to people with partial disability or short-term disability, Social Security does not. You can download a publication with more information on this from the Social Security Administration website at to learn more.
Regarding the timing of your application, you must be at least 61 years and 9 months old to apply for retirement benefits. You should apply for benefits no more than four months before the date you want your benefits to start.
If you are not getting Social Security and you are not ready to retire, you should still sign up for Medicare four months before your 65th birthday. For more detailed information on the application process, visit
Also check out the guide to Social Security basics at my website:
Mark Miller is helping write the playbook for new career and personal pursuits of a generation. Mark blogs at; contact him with questions and comments at 



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