Is the 4% Retirement Rule Still Valid or Is The 5% Retirement Rule the New King?

Is the 4% Rule Still Valid or Is The 5% Rule the New King?

The way things are going, a long-running retirement “rule” may just be going the way of the dinosaur.

Move over the 4% Rule – and say hello to the 5% Rule!

If you didn’t already know, the short story is that the 4% Rule is a way to determine how much you should withdraw from your retirement funds yearly so that it lasts throughout your lifetime.

4% was enough for the longest time, but inflation has blown it (and basically everything else) out of the water.

Granted, withdrawal rates will vary year by year, but on average, we’ve seen this number increase since the rule was coined back in the 90s.

So what does this mean for you?

If you withdraw a higher percentage from your retirement savings each year, guess what that means?

That’s right. Your meticulously planned retirement income will drop at one additional percent.

Sure, 1% doesn’t sound like a lot, but if you figure that you need to live on your nest egg for the remainder of your life, this vision of a bucket with a small hole in it might seem just a bit more concerning.

It’s not all doom and gloom, however.

The simple fact that we’re aware of this potential hole in your retirement bucket means we can plan for both the best and worst-case scenarios. In essence, help you patch it up so you don’t run out of money during retirement!

This may mean reallocating your investments, creating a lifetime income plan, or if you are working, saving some more.

 

There’s a bunch of ways to patch that bucket up.

You can always give us a call or click the link below and we can strategize on ways to help make sure you don’t wake up one day to a retirement that’s on empty.