Should You Follow the 4% Retirement Rule?

Should You Follow the 4% Retirement Rule?

The 4% rule derived from a 1994 study by William Bengen in which he found that 4% was the highest rate that held up over a period of at least 30 years. Here’s how the rule works: You start by withdrawing 4% of your nest egg and then adjust the withdrawal amount to keep pace with inflation. So should you follow the 4% rule? Walter Updegrave on CNN Money recommend to start out with a reasonable withdrawal rate between 3% to 4% to support you 30 or more years in retirement. “You can go with a higher rate or a lower one. Just remember that the lower your initial rate, the less income you’ll have to meet your spending needs and the more likely you could end up with a big retirement account balance late in life. Conversely, starting with a higher rate will provide a more comfortable lifestyle, but could subject you to a greater risk of outliving your savings. Once you’ve decided on a withdrawal rate, you should be ready to boost or cut back your withdrawals based both on your spending needs and how much your nest egg’s value is rising or falling.” (

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