#216: It’s September! If you’ve been listening to the show for the past few months, then you know that I’m on what I’ve dubbed my September Sabbatical, in which I’m taking a break from podcast production and traveling the globe.
In light of that, we’re digging through the archives and airing some of my favorite interviews on the show, in between airing interviews I’ve done on other podcasts.
Welcome to another episode from our archives! This one was recorded in March 2018, and Dr. Wade Pfau had a ton of insight into the four percent rule that so many of us are concerned with.
First, here’s a brief history of how the four percent rule came to be.
In 1994, William Bengen decided to look at 30-year timespans throughout U.S. History, beginning with the year 1926.
He worked under the assumption that a retiree held 50 percent stocks (in the form of S&P 500 Index), and 50 percent bonds (intermediate-term government bonds).
He looked at two things: the worst-case scenario, and how much an investor could sustainably withdraw from their portfolio under that worst-case scenario.
The year 1966 ended up being one of the worst to retire during, and an investor could withdraw 4.15 percent during the first year, and 4.15 percent, adjusted for inflation, every subsequent year.
That is how the 4 percent rule came to be.
Dr. Wade Pfau, a Professor of Retirement Income at The American College of Financial Services, argues that the 4 percent rule may not be the end-all-be-all we think it is.
He voices his hesitations and explains how you can determine how much you can afford to spend in retirement on this episode.
Enjoy!
P.S. - We’ll return to our regular podcast production schedule in October!
For more information, visit the show notes at http://affordanything.com/216
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