Since William Bengen published his seminal research in 1994 showing that an inflation-adjusted withdrawal amount equal to 4% of retirement date assets could be sustained over all of the rolling 30 year periods in the U.S. historical data, we have known the 4% rule for retirees. But the 4% rule is too simplistic and does not take into account a variety of factors, some of which suggest using lower withdrawal rates and others which suggest using higher withdrawal rates. These factors include the limited historical data and current low bond yields, the impact of fees and taxes, the role of legacy goals, the impacts of survival probabilities on appropriate planning horizons and spending patterns, the impacts of greater portfolio diversification, the role played by Social Security and other income sources from outside the financial portfolio, the importance of adjusting withdrawals in response to market returns, and the need to consider the magnitude and harm caused by portfolio depletion. After describing more fully about how the 4% rule was developed, these complicating factors will be explained in greater detail.
Professor of Retirement Income,
The American College
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