A new warning has been given on the rates that people typically withdraw cash from their pensions. As life-expectancy is increasing, the rates that used to be recommended could now be over-optimistic. Research by pension company Aegon suggests that one in five people risk running out of money in their pension.
Morningstar reports –
“Aegon said that many people have not sought financial advice on their retirement options. Instead some have relied on older calculations which suggest that taking a 4% income is sustainable over the long term… This “4% rule” was developed by US adviser William Bengen in 1994, and has often been used as a rule of thumb for determining a sustainable level of retirement income. However, Aegon’s research found that in today’s economic climate a 65-year old with a low-risk portfolio has a one in five chance of running out of money over 30 years if they follow this strategy.”