#86: Pretty much everyone in the FIRE community has heard of the 4% rule.
It is the starting safe withdrawal rate number for a 30-year retirement horizon that was proposed a few decades ago by retirement researchers.
And it has attained near pop culture status in the FIRE community because it’s such a simple mental shortcut to answer the question: “how much can I safely withdraw from my portfolio each year in retirement and have high confidence that I’ll be financially secure for the rest of my life?”
This is easily the most important question for ANY retiree, and especially early retirees. So, it’s no wonder this topic is so intensely discussed in the FIRE community.
More than a few early retirees and FIRE bloggers swear by the 4% rule and have plunged into their own retirement using this withdrawal rate expecting that it will carry them through for the rest of their lives.
But when you ask the quants – the economists with the PhDs – there is broad agreement that the 4% rule no longer works most of the time.
But why not?
This week, I invited the renowned retirement economist Wade Pfau, PhD/CFA, who is Co-Director of the American College Center for Retirement Income, to share insight on why the 4% rule no longer works in today’s environment. He suggests an alternate safe withdrawal rate number that may be better suited for today’s retirees.
We discuss:
Check it out here:
https://hackyourwealth.com/4-percent-rule
What do you think your safe withdrawal rate number is? And what asset allocation do you assume for that? Let me know by leaving a comment.
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Links mentioned in this episode:
Intro/Outro: Old Bossa by Twin Musicom.
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