Thursday, May 1, 2014

Is the 4 Percent Rule Still Relevant for Retirees? Uh, Hells No.

Thanks to David Ning for posing this question in his recent post.
Readers of this website will note that over the past four years about half of the posts have been raves against the 4 Percent Rule, so you will undoubtedly not be surprised to know that I agree with Mr. Ning's conclusion on this one.  However, it is one thing to criticize the 4% Rule and another thing to offer readers a solution (other than Mr. Ning's, "perhaps the safe number is now 3.5 or 2.8 percent.")

The solution is to use a better strategic withdrawal approach.  Fortunately, the actuarial approach recommended in this website is a better approach than the 4% Rule.  If you have Excel on your computer, it is very easy to use.  See our post of December 27 of last year for an example.