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By Christine Benz | 12-13-2012 02:00 PM

Don't Play Games With Your Withdrawals

Overspending and impatient selling are two moves that can prematurely drain retirees' portfolio income, warns financial columnist Gail MarksJarvis, who offers strategies to avoid these pitfalls.

Christine Benz: Hi, I am Christine Benz for Morningstar.com. Getting ready to retire involves assessing many moving parts. Joining me to discuss some of them is Gail MarksJarvis. She is a syndicated columnist. She is also the author of Saving for Retirement (without living like a pauper or winning the lottery).

Gail, thank you so much for being here.

Gail MarksJarvis: It's good to be here.

Benz: Gail, one group I'd like to talk to you about is people who are just getting ready to retire. This is a scary time for a lot of investors. They are attempting to sort of jump off their own cliff and see whether what they've managed to save is going to last them through what they hope will be a very long retirement. What are some of the key steps that you would suggest investors take when they hit that threshold and they think they're about ready to retire? How do you do that analysis to see if you're actually ready?

MarksJarvis: What's been troubling to me is when I've looked at some of the statistics, so many people just retire. They look at a number. They look at a 401(k) or an IRA and they see the most money they've ever seen. It looks huge. Maybe they have $300,000, maybe it's $500,000. "Oh, that's a giant amount!"

Benz: Sounds like enough.

MarksJarvis: So, they just assume they can use it and that everything will be fine. I am troubled by the number of calls that I get at my office from people who have been retired for a while, sometimes literally crying to me because the money is running out. They never realized that it would happen, and it's too late to go find a job.

So, what people need to do is up front before just looking at the number and saying, "It looks OK; I think I can make it," they need to sit down. They need to actually work a budget. There are many calculators on the Internet that are called like retirement income calculators where you can look and see if what you have is going to cover your needs. I know some people don't like the idea of budgeting. But again, on the Internet you could do a Google search for "retirement budget." All kinds of things; you don't have to do any math. You just insert the numbers and it turns out OK.

People often think they'll live with less in retirement than they lived before they retired. But I have talked to a lot of people that in which that was a surprise too. They thought they'd sell the big house and move somewhere else. But when they moved somewhere else, the condo they bought was as expensive as the house.

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