Ready to Tap Your Retirement Savings in 2026? 3 Questions to Ask Yourself First.
Key Points
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Start with a detailed and honest assessment of what you'll be spending each month.
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It's crucial to have a withdrawal rate that aligns properly with your investment mix.
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The $23,760 Social Security bonus most retirees completely overlook ›
Building a nest egg for retirement is not an easy thing. It takes decades of hard work and some sacrifices to free up the money you'll put into your IRA, 401(k), or other accounts, as well as some smart choices about what assets to invest those funds in. But with any luck, your efforts will pay off with a nice pile of money that serves your needs well once you stop working.
But after putting in all that effort, the one thing you don't want to do is put yourself at extra risk of running out of money during your golden years. That's why it's important to approach your retirement plan withdrawals strategically. If your intent is to start tapping into your retirement savings this year, here are three key questions you need to ask first.
1. What are my spending needs?
Before you decide how much money you're going to withdraw from your retirement savings, map out a budget for how much you actually need. If you're new to retirement, sit down and do a thorough review of your expenses. Make sure to include not just needs, but wants.
If you're no longer working, you'll need ways to stay busy. Maybe that means spending $65 a month on a gym, or joining a knitting club that has a $40 monthly fee. Maybe it means spending an extra $50 on subscriptions, or budgeting $1,000 a month for a long weekend getaway.
Once you figure out what your spending is going to look like, you can start to think about how much money to take out of your IRA or 401(k) each month.
2. What other income sources do I have available?
Your retirement nest egg may not be the only source of income you have at your disposal. Most American retirees are eligible for Social Security. Even if you're not ready to claim those benefits just yet, it's important to estimate their value and factor that into your longer-term withdrawal plan.
You may also be planning to work a few hours a week, or rent out property you own for income. Build a complete picture of all your income streams so you can see how much money you'll actually need to draw from your investment accounts.
3. What's a safe withdrawal rate based on how my portfolio is invested?
One thing you definitely do not want is for your retirement savings to run out in your lifetime. So it's important to establish a smart withdrawal rate from the start. That rate, however, should hinge on not just your income needs but also your portfolio composition.
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