Does the 4% rule of withdrawals still apply?

[CoachKandSportsguy]

Does the 4% Rule Still Apply? - A Wealth of Common Sense (https://awealthofcommonsense.com/2025/07/does-the-4-rule-still-apply/)

maybe or maybe not. .

[jimhoward]

The math of a 4% withdrawal rate works fine. It has tolerated varying economic conditions in the past and will likely do so in the future.
The biggest problem with a 4% withdrawal rate is that real world spending is not steady. It punctuated by large expenditures such as home improvements, automobiles, and medical emergencies which are not typically accounted for adequately.

70 year-olds pulling 4%/year from their retirement funds is not a problem. Pulling 4% per year for living expenses and then also raiding it for grandchild's college, and a lanai enclosure not so much.

For this reason I think a bucket method is better.

[collie1228]

Bucket method is much better for peace of mind. I know my immediate bucket is always ready for expenditures no matter what bucket no. 2 or 3 are experiencing. It’s worked well for me for 13 years now.

[manaboutown]

Just ordered Bengen's new book.

A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More


https://www.youtube.com/watch?v=gQqcKepuQdA

[Stu from NYC]

I would call it a guide but individuals have different spending needs.

[dougjb]

Well give it a try!

Rely on the anonymous "experts" here instead of paying a financial expert a few hundred bucks for a proper analysis.

If it doesn't work out for you and you run out of money down the road, you can always complain about the terrible "expert" advice you received on TOTV.

Please remember if you are satisfied with the responses you receive here on this matter, you can focus on seeking do-it-yourself open heart surgeryon TOTV. I hear there are some excellent "experts" on that subject here.

[Caymus]

Well give it a try!

Rely on the anonymous "experts" here instead of paying a financial expert a few hundred bucks for a proper analysis.

If it doesn't work out for you and you run out of money down the road, you can always complain about the terrible "expert" advice you received on TOTV.

Please remember if you are satisfied with the responses you receive here on this matter, you can focus on seeking do-it-yourself open heart surgeryon TOTV. I hear there are some excellent "experts" on that subject here.

Where are you getting an "expert" for a "few hundred bucks"?

[Bill14564]

Well give it a try!

Rely on the anonymous "experts" here instead of paying a financial expert a few hundred bucks for a proper analysis.

If it doesn't work out for you and you run out of money down the road, you can always complain about the terrible "expert" advice you received on TOTV.

Please remember if you are satisfied with the responses you receive here on this matter, you can focus on seeking do-it-yourself open heart surgeryon TOTV. I hear there are some excellent "experts" on that subject here.

I suspect open heart surgery requires more than the excel spreadsheet that the 4% calculation does. But hey, if you want to pay someone hundreds (more likely thousands) of dollars to run excel then I'm sure there are no end of people willing to take your money.

It is easy to look up past market performance
It should be easy to look up the past performance of your portfolio
A simple excel spreadsheet can show how past performance and future withdrawals would affect a balance

What is NOT simple is predicting future market performance, recognizing a plan is going wrong, or adjusting to a new reality.

[manaboutown]

Well give it a try!

Rely on the anonymous "experts" here instead of paying a financial expert a few hundred bucks for a proper analysis.

If it doesn't work out for you and you run out of money down the road, you can always complain about the terrible "expert" advice you received on TOTV.

Please remember if you are satisfied with the responses you receive here on this matter, you can focus on seeking do-it-yourself open heart surgeryon TOTV. I hear there are some excellent "experts" on that subject here.

I am amazed at how helpful some of the advice, opinions and shared experiences have been for me. At the very least some posts have given me direction of where and how to conduct my own research. The backgrounds of some of the posters are quite remarkable.

[ltcdfancher]

Where are you getting an "expert" for a "few hundred bucks"?
I have worked with a CFP in the past. Here’s the proposal for hourly engagements: Planner’s hourly rate is $350.00. For hourly engagements, Planner bills in 15-minute increments. Billed activities include: meetings, analysis and research, deliverable preparation for meetings or via correspondence, and coordination with external professionals (e.g., attorneys and tax professionals). Summaries prepared and sent after meetings are included in the time, i.e., they do not add to the time for the meeting.

I engaged with him to answer a very specific question. I also rely on a AUM fee-based advisor. Having access to both hourly and fee-based fiduciaries allows me to check one against the other.

[Boffin]

Yep, it works for me.

[spd2918]

No one rule applies to all investors.

I'm pulling 6% for 3 reasons:

1. I'm 56 and will enjoy the money more now than when I'm less active.
2. My investment money is gravy- my retirement is my main source of income.
3. I was not raised to amass someone's inheritance. There will be plenty of money / assets for the kids without my side stash.

[Caymus]

Saturday's Motley Fool Podcast had an interview with the inventor of the 4% rule (William Bengen). He said the basic safe case is 4.7% but depending on portfolio makeup can be much higher. He claims that there is an optimum ratio of equities/fixed income to maximize the safe payout.

He just released a new book.

[Aces4]

No one rule applies to all investors.

I'm pulling 6% for 3 reasons:

1. I'm 56 and will enjoy the money more now than when I'm less active.
2. My investment money is gravy- my retirement is my main source of income.
3. I was not raised to amass someone's inheritance. There will be plenty of money / assets for the kids without my side stash.

That will work ok for you unless the gravy boat breaks, which it has been known to do. :22yikes:

[manaboutown]

Saturday's Motley Fool Podcast had an interview with the inventor of the 4% rule (William Bengen). He said the basic safe case is 4.7% but depending on portfolio makeup can be much higher. He claims that there is an optimum ratio of equities/fixed income to maximize the safe payout.

He just released a new book.


I have been reading the book and am about half way through. The book contains many graphs which illustrate when one retires makes a huge difference in how large safe withdrawals may be. The higher the Shiller CAPE at retirement the lower the safe withdrawal percentage. Right now we are off the charts on the high side of the Shiller CAPE so there is no historical data he could analyze (page 38).

BTW Bengen's chosen optimum portfolio is 55/40/5 - equities/bonds/cash.

[Caymus]

I have been reading the book and am about half way through. The book contains many graphs which illustrate when one retires makes a huge difference in how large safe withdrawals may be. The higher the Shiller CAPE at retirement the lower the safe withdrawal percentage. Right now we are off the charts on the high side of the Shiller CAPE so there is no historical data he could analyze (page 38).

BTW Bengen's chosen optimum portfolio is 55/40/5 - equities/bonds/cash.

I downloaded the book for free with Hoopla. Looks like a "hard" read.

[manaboutown]

I downloaded the book for free with Hoopla. Looks like a "hard" read.

That was my first impression which is why I put the book aside until I was ready to tackle it.

Surprisingly, his analyses turns out to be fairly easy to follow and understand. He greatly simplifies by ignoring all tax ramifications. He treats taxes as budget items when they arise from IRA distributions and taxable accounts. He thereby essentially ignores them which is not a bad approach as taxes significantly vary from individual to individual as well as from time to time for every person.

"Portfolio tax rates have a dramatic effect on SAFEMAX". Page 91. SAFEMAX is Bengen's acronym for safe maximum withdrawal rate.

[manaboutown]

Well, I finished reading Bengen's book. In a nutshell, maintaining his prescribed asset allocation is the key to both optimizing and stabilizing one's safe maximum withdrawal rate. My asset allocation has drifted to 70-30 stocks/bonds&cash, well away from his model as the stock market has been on an upward tear.

[CoachKandSportsguy]

In a nutshell, maintaining his prescribed asset allocation is the key to both optimizing and stabilizing one's safe maximum withdrawal rate. My asset allocation has drifted to 70-30 stocks/bonds&cash, well away from his model as the stock market has been on an upward tear.

First, one can only backtest any asset allocation against known history. As long as history is similar to the past, which has a long track record of forging new paths, his allocation will work. .

Second, the stock market has no control group, and no counter factual, the future will be what the future will be regardless of the past, so IMHO, your equity position is too high, even though the current valuation feels very comfy and smart. .

of course, my opinion could be very wrong for a long time, or could be right sometime in the next X years, or both. . . having lost everything once in the stock market, I play much more risk adverse, and may not make a huge return, I just refuse to go backwards any significant amount. . . I have just seen a few people who have had very large amounts of money get very complacent or unable to sell, and have lost a substantial amount of money eventually. .

good luck. .