Having too much money in fixed income significantly reduces the probability of being able to make sustained, inflation-adjusted withdrawals over time. This is because, in most cases, it’s hard to earn a return from fixed income significantly above the rate of inflation that provides enough growth to cover long-term inflation.
As you approach retirement, your concerns often shift from how to grow your portfolio to how much you will be able to spend without it being depleted. Probably the most often-quoted response to this question is that by withdrawing 4 percent of your portfolio annually, adjusted for inflation, it will never run out of money. Many large institutions suggest on their Web sites that 4 percent is the magic number.
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