If we only knew exactly how long we were going to live, financial planning would be a breeze. Of course, we don’t know that, and residents of Florida retirement communities want to be able to enjoy their lifestyle without worrying about running out of money.

Let’s assume you have Social Security income and perhaps a pension. You may be able to supplement that with income from a part-time job, maybe rental property, or even revenue from the sale of assets you no longer need after downsizing to one of the amenity-rich Florida retirement communities. But eventually, you’re going to have to dip into your financial nest egg – those mutual funds, CDs, stocks, bonds and other investment vehicles you’ve been putting your savings in over the years.

Most financial planners recommend an annual withdrawal rate of four percent. If your money is properly invested and you withdraw four percent the first year you retire, then withdraw the same amount adjusted for inflation in each subsequent year, the experts say your money should last for at least 30 years and often longer. You can do the math to figure out if that amount will sufficiently supplement your other sources of income to fund the lifestyle you want.

Of course, the key to the four percent formula is the phrase “properly invested.” That means a diversified portfolio that will generate the necessary growth while staying within your personal level of risk tolerance. You may want to stick with lower-risk investments that produce a lower rate of return, but that means reducing your withdrawal rate as well.
It’s a good idea to get advice from a qualified financial advisor but do your own research at the same time. Be sure you clearly understand the recommendations. Remember, it’s your money and the final decisions about handling it are yours.