Usually, your money needs to last a lifetime, so be careful how much you take.
At age 65, research suggests you should take no more than 2-4% of your money each year if you want it to last a lifetime. Even this doesn’t guarantee that your money won’t run out.
There are circumstances when you could consider taking more than 2-4% each year. For example:
• Poor health. If you suffer from a medical condition likely to significantly shorten your life expectancy you could consider taking a higher income.
• Other assets. If you have other savings and investments to fall back on, or if you’re prepared to release equity from your home, you could take perhaps more income
• Ignore inflation. If you choose a fixed income that doesn’t increase each year you could take a higher income. Expenses often fall during retirement so this can make sense.
• If you’re much older than 65 when you retire. Your savings don’t need to last as long, so you could take more than 2-4% each year.
Taking more than 2-4% each year is a risk. Even if you suffer from poor health you could still live longer than expected. Alternatively, ignoring inflation may reduce the spending power of your money in future. For example, roughly 25 years ago a pint of beer cost just £1.54 and a fish supper £1.68!
If in doubt, think about taking professional financial advice.