The 4% Rule and Safe Withdrawal Rates In Retirement (60 Minute Financial Solutions)

Retirees don’t need to know the historical “least common denominator” withdrawal rate that survived most data samples (as the 2nd Generation models taught). They need to know the forward-looking investment expectation given the actual data that exists on the day their retirement begins—which is what 3rd Generation models teach. These are completely

You must remain flexible during retirement and use your brain. Correct and adjust your spending based on the growth or decline of your portfolio. Be rational and your risk of running out of money will be reduced.

And if that isn’t shocking enough, the 2010 retiree is looking at a 1.8% safe withdrawal rate according to Pfau’s research. No, that is not a misprint—1.8%—far below the conventional wisdom of 4% based on historical research.

market valuations at the time you begin your investment holding period are inversely correlated to the return you can expect over the following 10-15 years. High market valuations and low interest rates are followed by lower 10–15 year portfolio returns, and conversely, low valuations and high interest rates have historically been followed by highe

The bottom line is a safe withdrawal rate that spends principal is an oxymoron when longevity expands beyond 30+ years. Any spending of principal is not safe over very long periods. You should adjust your investment strategy and withdrawal rate accordingly.