Educating Your Workforce On Retirement Plan Withdrawal Rates

Many company benefits departments struggle to convince employees of the importance of saving for retirement through the company 401(k) plan. One reason is that participants underestimate the amount of savings necessary for retirement. This results in some retirees spending all of their savings within a few years of retirement, at which time they are forced to live solely off social security benefits or go back to work.

Many financial advisors recommend that retirees withdraw no more than 3.5% to 4% of savings each year. In other words, a retiree who has $100,000 in his 401(k) account should withdraw no more than $4,000 per year. Withdrawing at a higher rate can result in a retiree outliving his savings or his savings not keeping up with cost-of-living increases.