Bill Bengen, renowned financial advisor and creator of the 4% rule, shares his insights on retirement planning and portfolio management. He explains how he devised the 4% rule and why it remains relevant today. The conversation highlights the impact of inflation and the psychological challenges retirees face during market downturns. Bengen also discusses the importance of strategic investment choices and diversification, while cautioning against the pitfalls of '1 more year syndrome'—a common retirement misstep.
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insights INSIGHT
The Origin of 4.5% Rule
Bill Bengen discovered the 4.5% safe withdrawal rate after analyzing over 200 portfolios over 30 years.
This rate ensures retirees do not outlive their savings in most historical scenarios, even in harsh markets.
insights INSIGHT
Inflation is Retirement's Biggest Threat
Inflation is more damaging than bear markets during retirement since it forces increasing withdrawals.
High inflation eras like the 1970s are the worst-case scenarios for retirees.
insights INSIGHT
Power of Small Company Stocks
Adding small company stocks to a portfolio historically boosts returns and safe withdrawal rates.
In some periods, small caps supported withdrawal rates as high as 25%, greatly improving retirement sustainability.
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First published in 1934, Security Analysis is a seminal work in the field of finance that lays the intellectual foundation for value investing. The book, written by Benjamin Graham and David L. Dodd, distinguishes between investing and speculating, emphasizes the importance of thorough financial analysis, and introduces key concepts such as the 'margin of safety.' The sixth edition includes commentary from leading Wall Street money managers and a foreword by Warren E. Buffett, who has praised the book for its enduring relevance in modern markets.
Conserving Client Portfolios During Retirement
Conserving Client Portfolios During Retirement
William Bengen
He really is the man who needs no introduction (but here’s one anyways). Bill Bengen, the inventor of the 4% rule (and personal finance hero of Mindy & Scott) stops by the Money Podcast to talk about how he calculated his famed 4%, how he managed his client’s portfolios, and how the 4% has aged throughout the past three decades.
In his Original Article from the Journal Of Financial Planning, October 1994, Bengen outlined a groundbreaking calculation: a 4% withdrawal rate from your retirement accounts is all you need to comfortably retire (if enough is saved up). Bengen was hit with praise and criticism, but is still applauded to this day for having such a simple yet crucial metric for knowing how & when you can retire.
Using over 200+ retirement account portfolios spanning decades of time as research, Bengen still says with confidence, the 4% rule is a winner! He has the proof and we couldn’t agree more.
Whether you’re a few years or a few decades away from retirement, this episode features life-changing advice from one of the leaders in financial research. This is an episode you won’t want to miss!
In This Episode We Cover
What the 4% rule is
How Bengen came up with the 4% rule and why it stands the test of time
How inflation becomes the “thief in the night” for many investors
The best (and worst) times to invest
How to stay the course during financial downturn
Which asset classes boost great returns and withdrawal rates
Steering clear of “1 more year syndrome”
The importance of rebalancing your portfolio
How to not accumulate too much wealth for retirement
Why everyone needs to learn how to be a saver, so they can enjoy life!
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