- 1). Pull out a copy of your latest retirement plan statement. Review the balance on the statement to determine how much money you have available. Keep in mind that the current balance might be more or less than the amount shown on the statement, depending on the performance of the stock market in the interim.
- 2). Calculate the percentages of stocks and fixed income investments in your retirement portfolio. This information might be shown on your statement, or you can calculate it yourself by dividing the total amount of stocks and stock mutual funds by the total amount of the retirement portfolio.
- 3). Adjust the percentages of your retirement portfolio to reflect a pre-retirement asset allocation. Keeping a 50/50 balance of stocks and fixed income can provide you with a cushion against inflation while protecting your portfolio from loss.
- 4). Examine your monthly budget carefully to get an idea of how much you expect to spend each month in retirement. Keep in mind that some expenses, like work clothes and lunches with coworkers, will go away, while other expenses, like travel and leisure activities, might increase.
- 5). Review any other sources of income you have available in retirement, including your monthly Social Security check and the amount of any pension you are entitled to. Compare this amount to the amount you expect to spend in retirement.
- 6). Calculate the amount of income you need to withdraw from your nest egg to make up any shortfall between guaranteed sources of retirement income and what you expect to need. Determine what percentage of your retirement portfolio you need to meet those expenses. For instance, if you need $20,000 a year in additional income and have a retirement portfolio of $500,000, you could meet your needs by withdrawing 4% of the portfolio's value each year. Hopefully your investment returns would be able to generate at least that much, helping you put off any drawing down of plan assets.
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