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The 4% rule was developed in the 1990s by financial advisor William Bengen. According to Bengen, people could withdraw 4% of their retirement savings in their first year and then adjust annual ...
The 4% rule is arguably the go-to guideline for determining how quickly you can spend your savings. It states that a retiree can withdraw 4% of their nest egg's initial value annually, adjusted ...
The 4% rule is designed to make the typical retirement nest egg last 30 years, regardless of its size. To put it another way, the 4% rule should, in theory, apply to a nest egg worth $400,000 or ...
The rule was later further popularized by the Trinity study (1998), based on the same data and similar analysis. Bengen later called this rate the SAFEMAX rate, for "the maximum 'safe' historical withdrawal rate", [3] and later revised it to 4.5% if tax-free and 4.1% for taxable. [4] In low-inflation economic environments the rate may even be ...
A common rule of thumb for withdrawal rate is 4%, based on 20th century American investment returns, and first articulated in Bengen (1994). [14] Bengen later stated the 4% guideline was intended as a "worst case scenario" for retirees in United States, using a hypothetical example of someone who retired in 1968 at a stock market peak before a ...
The 4% rule is a solid starting point, but getting the most out of your retirement will require more planning and flexibility. Don't hesitate to consult a professional advisor for specific advice ...
Other authors have made similar studies using backtested and simulated market data, and other withdrawal systems and strategies. The Trinity study and others of its kind have been sharply criticized, e.g., by Scott et al. (2008), [2] not on their data or conclusions, but on what they see as an irrational and economically inefficient withdrawal strategy: "This rule and its variants finance a ...
The 4% rule is a popular retirement withdrawal strategy that suggests retirees can safely withdraw the amount equal to 4% of their savings during the year they retire and then adjust for inflation ...