Is the 4 percent rule still relevant for retirees?
By Rodney Brooks for The Washington Post
October 10, 2016
“If you read about retirement, you will probably be familiar with the 4 percent rule.
The rule was created in the mid-1990s by a now-retired financial planner to keep people from outliving their retirement nest eggs. Here’s how it works: If you have a nest egg of $1 million, you should draw down no more than 4 percent, or $40,000 a year.
So here’s the question. Should you still be adhering to a rule created more than 20 years ago when the economy and interest rates were so different?
Well, it depends. Many planners still use it as a rule of thumb, but if anything, many recommend that you withdraw less — more like 2 or 3 percent. The reason is longevity. We are living longer. In fact, you can now live in retirement longer than you did in your career.”