HOW TO
The Demise of the 4% “Safe Withdrawal” Rule
W
hen you think about your future, how do you envision your retirement years? For most, retirement is a chance to enjoy doing more of what you want to do. You’ll have more time to travel, or maybe you just want to finally slow down, spending more time with loved ones. Unfortunately, for many busy professionals that fail to plan well, that peaceful vision of retirement will now be tougher to attain. Between the global pandemic, rising inflation, and market volatility that’s (always) just around the corner, it is difficult to determine what your nest egg will look like in 5 years, let alone 30 years from now. One of the biggest concerns we hear from clients is their uncertainty regarding how much money they can expect to safely spend each year once they retire without running out of money. Traditionally, the 4% “safe withdrawal” rule has been used as a rule of thumb, but recent events have called into question how sustainable the 4% rule really is.
WHAT IS THE 4% RULE? The 4% rule is a retirement income theory about how much money you can safely withdraw from assets each year without running out of money. It became widely publicized after Bill Bengen’s research in 1994, which showed that withdrawing up to 4% of one’s invested assets each year (adjusting annually for inflation) could sustain the typical 30-year retirement. This published research used data going all the way back to 1926.
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For more information, please visit arizonaphysician.com/4-percent-rule
