The 4% Rule: A Strategy for the Wealthy?
In the past, the simple rule of thumb of withdrawing four percent a year from your portfolio and your chances of having enough money for a thirty year retirement looked good. A recent article on NBC News shares how this strategy is no longer sufficient for the average American retiree with today’s low interest rate environment and higher life expectancies. They state this does not apply, however, to the wealthy households that have accumulated more than enough money to support themselves in retirement.
Based on historical interest rate averages, a recent study shares how in the past, a retiree drawing from savings for a thirty year retirement using the four percent rule had only a six percent chance of running out. However, when using interest rate levels from January 2013, they found that retirees’ savings would grow so slowly that the chance of failure increased to fifty-seven percent. In addition, if you take into consideration a conservative three percent rate of inflation, you will need to double your income over the next twenty years, just to maintain your same standard of living.
If you think about it, retirement represents twenty to thirty years of unemployment. What is your plan to generate consistent and dependable income in retirement? We encourage you to attend our next upcoming education event on May 20th, 2015 at 5:30 p.m. as we discuss The 5 Core Areas of an Effective Retirement Plan. Click here to register for this event.
To read the above referenced article, click here.