Devoted to understanding the basics and fundamentals of investing

How much should I take from my IRA each year when I retire?  That's a good question.  The answer is, "It depends."  I'll walk you through an example.  You will need the answers to some questions and I'll tell you where to find them.

I'm 53 years old.  According to a life expectancy table at the Social Security web site the average life expectancy for males my age is 25.4 years.  So, I should live until late October of 2031.  At another part of the web site it tells me I would earn a little more than $2,000 per month if I retire at age 66.

My employer has a pension calculator that tells me I will be eligible to earn a pension of about $3,000 per month if I retire at age 66.  I have a pension annuity from Chase of $838 per month from when I worked there before they switched to a defined contribution benefit program (401(k)).  So, before I access my 401 (k) and my IRA I will have income of about $5,900 per month. 

I can take distributions penalty free of any amount from my IRA and 401 (k) from age 59 1/2 until age 70 1/2.  If I were earning $100,000 per year now and felt I would only need $70,000 per year to live, I wouldn't need to draw anything from my tax deferred savings ($5,900 x 12 = $70,800).  If I needed the whole $100,000 per year I would need to draw another $2,433 per month from the IRA or 401 (k). 

At age 70 1/2 however, since I own a traditional IRA (not a Roth), I have to start taking minimum distributions.  Under the new IRS regulations and according to the Uniform Lifetime Table I need to take 1/27.4 of my IRA balance each year from age 70.5 or 3.6496% per year.  If I earn more than that in income and investment gains, I will not deplete the account balance.  If I earn less, I will start depleting the IRA.

So, the factors that enter in to the decision are your current age, your expected life span, how much you will get from Social Security and any pensions you may have and the age you plan to retire at.  I hope these calculators and tables help you find the answers.

Remember, wealth is not how much you earn; it is how much you save.