Challenges to the 4% Rule
How Do Taxes Affect The 4% Rule?
Because the tax situations of individuals will vary so greatly in terms of tax rates, interest and dividends supported by the portfolio, and the cost-basis of the taxable account, it is impossible to create one general number for a sustainable spending rate from a taxable account.
Read MoreRetirement Income Planning Should Focus On Saving, Not Withdrawing
This case study illustrates the safe savings rate concept using someone saving for retirement during the final thirty years of her career, and she earns a constant real income in each of these years.
Read MoreDoes the 4% Rule Work in Today’s Markets?
This is a matter where Monte Carlo simulations are able to shine, by allowing simulations to begin from today’s starting point rather than incorporating historical outcomes generated from completely different market environments.
Read MoreDon’t Bet Your Retirement On History Repeating Itself
People nearing retirement should take note of the fact that U.S. financial markets have entered uncharted waters now in regards to the low bond yields and high stock market valuations facing investors.
Read MoreDoes The 4% Rule Work Around The World?
From a global perspective, asset returns enjoyed a particularly favorable climate in the twentieth-century United States, and to the extent that the U.S. may experience reversion in the twenty-first century, present conceptions of safe withdrawal rates may be unsafe.
Read MoreIt is Optimal for Retirees to Plan for Reduced Spending with Age
A general assumption is that people plan to spend a constant inflation-adjusted amount for as long as they live. However, this spending plan is actually not optimal for any reasonable set of preferences about the tradeoff between spending now and later, even if we assume that future market returns are known in advance.
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