Dangers of Relying on the 4% Rule in Early Retirement Scenarios
May 24, 2017 • 1 Min Read
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This is a great one from the Happy Philosopher. I've always wondered about the 4% rule, just never felt I could trust it. The jury's still out in my mind, so I love reading different perspective like his.
Key points:
- Your money should last at least 30 years if you only spend 4% of it each year (inflation adjusted). To simplify, if you multiply your desired spending by 25, this is the asset base you need. (eg. 55,000 x 25 = $1,375,000).
- If you are planning an early retirement with maximum efficiency/frugality do not rely on a 4% withdrawal rate, not because the math is faulty, but there are simply too many things that can go wrong. Such as health, divorce, children, lifestyle inflation.
- The 4% rule is a great place to start, and it will work the vast majority of the time if you follow the set of assumptions it is based upon, but realize its limitations for your personal situation and be flexible.
Read the full article here:
Dangers of Relying on the 4% Rule in Early Retirement Scenarios
Disclaimer: The topic presented in this article is provided as general information and for educational purposes. It is not a substitute for professional advice. Accordingly, before taking action, consult with your team of professionals.
