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KiplingerAug 07, 2020
Drawing Down Retirement Savings in a Pandemic
As the coronavirus shut down the economy last spring, many consumers had their budgets cut by default. Trips and shows were canceled, nonessential medical procedures were postponed and restaurants closed.

SEE MORE 24 Dividend Cuts and Suspensions Chalked Up to the Coronavirus For retirees living on portfolios—or those forced into retirement unexpectedly due to the virus—the forced spending slowdown may have helped cushion the financial blow as they watched their investment account values plummet. Then, stocks lurched ahead and have since been volatile, leaving many retirees to wonder if they should adjust their game plan for retirement income as the economy opens up.

"The first quarter of this year represented the very definition of sequence risk," notes Patrick Nolan, a BlackRock portfolio strategist. "Early in retirement, it's the most challenging situation for a retiree who has begun to take cash flow from retirement accounts. You're selling assets, locking in losses and impairing the future value of the portfolio." 

To be sure, drawing down the right percentage amount from a portfolio each year is complex business. There are tax implications, so drawing from the right accounts at the right time matters. But knowing how much a retiree can spend each year without running out of savings in old age is even more important.

Plenty of tax and financial pros like to argue over the most tax-efficient ways of drawing down a portfolio once retirement has begun. Far fewer enjoy talking frankly about overall spending levels. Who wants to wade into the weeds of telling couples that trip to the Galapagos is off the table?

But let's go there, because the economic fallout from the pandemic is challenging old assumpt

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