Got $1 Million in Retirement Savings? Here's How Much Money You Can Really Take Out Each Year.

It's not an easy thing to build a retirement nest egg. So once you've taken that step, you'll no doubt want to make sure that money lasts as long as you need it to.

But even if you manage to accumulate a fairly large sum of money -- say, $1 million -- you still need to manage your retirement plan withdrawals carefully. And while you may be inclined to fall back on one popular rule of thumb, doing so could come back to bite you.

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Be careful with the 4% rule

Financial experts have long touted the 4% rule in the context of managing retirement savings. The rule says that if you withdraw 4% of your savings balance your first year of retirement and adjust subsequent withdrawals for inflation, your nest egg should last 30 years.

If you have $1 million in savings, withdrawing 4% gives you $40,000 of income to work with each year, not accounting for inflation adjustments. And that, coupled with Social Security, may be enough to cover your expenses. But 4% also isn't necessarily the optimal withdrawal rate for you.

For one thing, the 4% rule assumes that you want your savings to last for 30 years. But if you're retiring at age 59, you may need your money to last a bit longer. And if you're retiring at 72, you may not need 30 years out of your nest egg.

You'll also need to consider your investment mix. If you've mostly dumped your stocks, 4% may be too aggressive a withdrawal rate if your money isn't growing so much.

In fact, if you decide that a 3% withdrawal rate is best for you, with $1 million, you're looking at $30,000 a year in retirement income. That could make a big difference in your lifestyle compared to withdrawing $40,000 per year.

Take a personalized approach to managing your savings

Your retirement nest egg most likely looks different from your neighbor's, brother's, cousin's, and so forth. And because of that, you should treat your situation as unique rather than use a common rule of thumb for managing your savings that may be right for some people, but isn't actually right for you.

If you're not sure how to come up with an appropriate withdrawal rate, sit down with a financial advisor. Together, you can review your expenses, investment mix, and goals to come up with a withdrawal rate that works for you.

Having an advisor can also be helpful because the withdrawal rate you land on might need to be fluid. You may have some years in retirement when your expenses increase due to factors that include home repairs or medical situations. Or, you might have a year with a lot of travel due to family occasions. So it's a good idea to take a flexible approach to managing your nest egg rather than lock yourself into a single withdrawal rate for years on end.

And to be clear, you may decide, either on your own or after consulting a professional, that 4% is indeed an appropriate withdrawal rate for your IRA or 401(k). But it's important to draw that conclusion rather than assume that the 4% rule is the way to go right from the start.

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