Can You Safely Ignore the 4% Rule?
Manage episode 408887653 series 3428540
There’s a popular “rule of thumb” that’s been around for about 30 years known as the “4-percent Rule.” The main idea is that your portfolio has a better chance of surviving for 30 years if you withdraw no more than 4 percent of the total each year. Some have said it should be even lower than that, depending on your investments.
But is this so-called “rule” actually something you should follow? The more important issue should be your actual withdrawal strategy. If you're forced to sell stocks when they’re down just to meet your spending needs, you’re asking for trouble no matter what your rate of withdrawal may be.
In this week’s episode of Managing Your Financial Future, podcast host Johnny Dean speaks with “Professor” Rick Plum, CFP®, to get Rick’s take on how the “4 percent rule” is really just a guideline, and why having a sound withdrawal strategy may be your bigger key to success.
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