How much money is it advisable to spend per year during retirement? The formula experts use

The majority of Spaniards spend their lives working with in order to save for retirement. However, when the time comes to make use of those resources, doubt takes over. And sustaining yourself during this new stage of life can be complicated for many, especially for those whose pension does not seem to be enough for a comfortable rest.

In this context, it is essential to know how to manage an entire life’s savings to avoid making basic mistakes such asor spend the accumulated money too soon or in things that, perhaps, for this period, are not necessary. For this, the BBVA bank explains a classic formula that can help older people know how much money is advisable to spend per year during retirement.

The 4% rule for managing savings

The rule indicates that each year you can withdraw 4% of your total savings and over time this amount must be adjusted for inflation. That is, if you have 100,000 euros in savings, your allowed balance will be 4,000 the first year and will continue to increase according to inflation. The intention is for the savings to last several years, according to BBVA, the ideal would be 30.

It should be noted that the rule It is not perfect nor does it apply to everyone in a rigid way. There are personal variations that are not determined by inflation, do not consider taxes or commissions and assume a very broad horizon, 30 years, which may not suit all retirees. In this order of ideas, It is a starting pointbut it must be adapted to personal income, risks and particularities of each case.

“Leaving an inheritance is a miscalculation”

One of perhaps the most important flaws of the 4% rule is, as mentioned above, the horizon it contemplates. According to the latest data available from the INE, The life expectancy of those who survived to age 65 is 21.68 years on average. And while it’s clear that everyone wants to extend their savings until their last breath, for those who are already retired or over 65, the planning time horizon may be different.