How to protect your retirement savings | members only

2. KEEP SOME CASH Once you’ve calculated your essential costs, set aside a cash reserve large enough to cover them for the next one to three years, if possible. By keeping that cash at the

ready, you can avoid having to tap your retirement portfolio at market lows, or run up credit card bills, to meet expenses. “You will worry a lot less, while buying time for the market to

recover,” says Liz Windisch, a financial planner in Denver. If pulling together all that cash isn’t realistic, consider shifting a portion of your retirement investments to cash, says Dana

Anspach, a financial planner in Scottsdale, Arizona. “If there’s a downturn in the first years of retirement, you can use that money for costs instead of selling stocks,” Anspach says. “And

if the market goes up, you can sell some of your stocks to meet expenses, while leaving some cash on hand.” Be sure to keep your cash savings safe and easily accessible, perhaps in a bank

account or Treasury money market fund. Many cash accounts are still paying attractive yields. Recent online bank savings accounts were yielding 5 percent or more, according to

­DepositAccounts.com. 3. BE FLEXIBLE ON WITHDRAWALS You may have heard the rule of thumb for retirement withdrawals: Start by taking out 4 percent of your portfolio in the first year, then

increase that amount annually based on the rate of inflation. This approach has worked well over past 30-year periods, but it’s a dicey move to simply set and forget your withdrawal rate.

Jay Abolofia, a financial planner in Waltham, Massachusetts, favors a simple approach similar to the IRS’s rules for taking required minimum distributions (RMDs) from IRAs and 401(k)s:

Divide your savings by your expected remaining years, then withdraw that amount. For example, if Andrea or Beth expects to live to 90, she divides $500,000 by 25 to get a withdrawal of

$20,000 in the first year. “In future years, the remaining portfolio would be divided by fewer years, which could allow you to take out more,” Abolofia says. As with RMDs, the plan will

gradually reduce your account over your lifetime. Another approach is to use a spending plan linked to market performance. A 2006 study by Jonathan Guyton, a financial planner in Edina,

Minnesota, and William Klinger, a professor at Raritan Valley Community College in Branchburg, New Jersey, found that using “guardrails” — rules that specify small spending changes after big

market swings — can help retirees avoid running out of money over three or more decades, despite bear markets. “By making a small adjustment right away, it can save you from having to make

big adjustments later,” Guyton says. The precise rules require some math, so this approach is best for those who are comfortable punching a calculator. You’ll also need to cope with

­occasional swings in income.