So you have amassed a nest egg large enough to retire. Now comes the hard part: figuring out how much you should withdraw each year to enjoy life and make sure you don't run out of money.
It can be a difficult balance. Many investors simply use the 4 percent rule. Under this scenario, you withdraw 4 percent per year from a diversified portfolio of stocks and bonds, adjusting annually for inflation, and you will have enough to last for 30 years in retirement, based on historical returns of the U.S. stock market.
The problem with the 4 percent rule, which was developed in the 1990s, is that portfolio losses in the early years of retirement would make following it unsafe for many retirees, according to research by Wade Pfau, a professor of retirement income at the American College of Financial Services.