Retirees: Stop Relying on the 4% Rule
The “4% rule” is one of the most well-known retirement rules of thumb: withdraw 4% of your portfolio in the first year of retirement, adjust for inflation annually, and your money should last 30 years.
But following it blindly could either shortchange your lifestyle or put your retirement at risk.
Here’s what you should know:
Most Retirees Could Have Spent More
A recent analysis published in the Journal of Financial Planning looked at every 30-year retirement cohort from 1973 to 1993. The results were clear:
In most historical periods, retirees could have withdrawn 6% to 9%+ safely.
Only in the worst-case scenario (1973) was the “safe” withdrawal rate just above 4%…
If you follow the 4% rule in a favorable market, you might be leaving hundreds of thousands of dollars on the table—money you could’ve used for travel, home upgrades, gifts, or simply enjoying life more.
But Fixed Spending Can Be Dangerous, Too
What if you retire into a bear market, like in 2008 or 2022? Sticking to a fixed spending plan could mean drawing down your portfolio when it’s already down—often what you want to avoid.
What You Should Do: Use a Dynamic Plan with Guardrails
Instead of guessing the “right” number and hoping for the best, smart retirees are using a more flexible approach:
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Spend more when markets are strong
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Pull back slightly when markets dip
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Stay within “guardrails” that help protect against running out of money
This gives you the best of both worlds: confidence your plan is sustainable and permission to enjoy more of your wealth when it’s safe to do so.
If you want help building a smarter withdrawal plan—or reviewing whether your current approach is on track—I’d be happy to help.
Just reply to this email or give me a call at 707-899-1010. Alternatively, you can schedule a 15-minute introductory call by clicking here.
Image Source: Journal of Financial Planning https://www.
Best,
Zack Swad, CFP®, CWS®, RLP®, BFA™, AWMA®, AAMS®
President & Wealth Manager, Swad Wealth Management, LLC
Tel: 707-899-1010 | Fax: 707-324-6769
www.swadwealth.com
100 Stony Point Rd, Suite 244, Santa Rosa, CA 95401
Swad Wealth Management, LLC is an Investment Advisor registered with the State of California. All views, expressions, and opinions included in this communication are subject to change. Please contact us if there is any change in your financial situation, needs, goals or objectives.
This message is intended for informational purposes only and should not be considered investment or financial advice. It is not a solicitation or recommendation to buy, sell, or hold any securities or financial instruments. Investing involves risks, including possible loss of principal. Past performance does not guarantee future results. Please consult your own financial, tax, or legal advisors regarding your specific situation.
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