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Systematic withdrawal is a method of receiving income in regular installments from your mutual fund accounts, retirement plans, or annuity contracts.
Generally, you decide how much you want to receive in each payment, and the schedule on which you want to receive the income. Those payments continue until you stop them or you run out of money.
Unlike the alternatives, such as a pension annuity, systematic withdrawal gives you the flexibility to stop payments at any time, adjust the amount you receive, or choose a different way to access your money.
And by withdrawing the same amount on a regular schedule, you limit the risk of taking a large lump sum at a time when your account value has dropped because of a market decline.
The chief drawback of this withdrawal method is that there's no guarantee of lifetime income, so it's possible to deplete your account more quickly than the rate at which it's growing. That could mean running out of money.
After you reach 70 1/2, you can use systematic withdrawals as a way to ensure you take out the minimum required distribution (MRD) from qualified retirement accounts and IRAs to avoid the risk of incurring IRS penalties.Yahoo Finance - Cite This Source - This Definition
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