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Laura West, a certified financial planner at West Financial Services in Des Moines.

How Much of Your Money Can You Spend in Retirement?

Four percent. That seems to be the long-held rule of thumb for how much of your money you can spend each year once you retire. But is it dead-on accurate? Will honoring it ensure that you don’t end up moving in with your grandchildren once you’ve burned through all your assets?

Experts have thought about this and have devised all manner of guidelines to help you not outlive your resources. Zolt’s Glide Path Spending Rule, for instance. Or Kitche’s Ratcheting Rule. Or Bengen’s Dollar Floor and Ceiling Withdrawal. All are calculations meant to inform your decision on how much to spend every year. They make assumptions about your spending (though not your habits), the rate of expected return on your remaining investment portfolio, and inflation, and come up with answers that may not address the question with pinpoint accuracy.

“The real-life situations of our clients are never static like the assumptions in the studies,” said Laura West, a certified financial planner at West Financial Services in Des Moines. For example, she said, “people have variable spending needs such as buying an RV one year to travel the country and the cost of care for aging parents the next year. And younger retirees may still be supporting adult children through college.”

The 4 percent guidance may, then, not be best suited to situations when people expect to have variable spending patterns from year to year, West said.

Further, drawing down 4 percent of your assets every year, when stock market gains of investment portfolios are expected to temper, might be too optimistic, said Christine Korte, a certified financial planner in West Des Moines with Ameriprise Financial Services Inc.

“People’s situations change,” Korte said. “Inflation goes up, tax laws change. … Four percent is pretty well gone.”

At present, Korte thinks a more realistic goal is for retirees to spend no more than 3.5 percent of their assets every year.

Developing a plan is useful—certainly better than not developing one. Both West and Korte cautioned that any sort of plan or budget should be revisited annually. Inflation alone should merit that. Certainly we remain in the midst of a period of benign inflation. Over time it historically has risen 3 percent a year. That may seem harmless, but that means that a dollar today is worth just 50 cents in 24 years. has an online savings withdrawal calculator that can help you calculate how fast you'll burn through your savings. It's not as precise as the tools that financial planners use, but it can give you a start.

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Legacy Bridge

Christmas Spending Could Rise Again

Pumpkins are so last week. The all-consuming trend from now until Dec. 25 is Christmas shopping, and we’ve shown we’re pretty good at it—and doing better.

Last year, shoppers polled by American Research Group Inc. said they intended to spend on average $929 for Christmas gifts. That was up from $882 the previous year. And since the Des Moines-area economy is just as robust, there’s a feeling, or at least a hope by retailers, that they will spend even more this year.

Christmas spending has steadily risen since 2009, when it sagged to just about $400 per person. It’s still not back to 2001 levels, when it peaked at $1,052.

Anywhere from a third to nearly a half of shoppers—it varies from year to year—have said they will buy from catalogs and direct marketers. And as you might guess, more and more people are using the internet to make purchases. People who shop on the internet have in the past said they intended to spend more money than general shoppers.

Regardless of how or where you shop, or how much you plan to spend (and honest, $929 strikes me as a bit skimpy; my friends in retailing suggest you can do better than that) you now have 54 days to accomplish the task.

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dsmWealth's Picks on What You Need to Know

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  • You may want to support charities overseas, but giving internationally isn’t the same as giving domestically. Because it’s governed by a complex set of U.S. government rules and regulations, you should undertake certain types of international giving only after consulting with your advisors and other tax experts. Read more here.

  • The world will have 43% more super-rich people by 2026 according to the annual Knight Frank Wealth Report. Alanna Petroff of CNNMoney reports here.


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