Optimal Finance Daily - Financial Independence and Money Advice 3373: [Part 1] Rethinking the 4 Percent Safe Withdrawal Rule by Fritz Gilbert of The Retirement Manifesto
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Dec 2, 2025 Fritz Gilbert challenges the outdated 4% safe withdrawal rule, arguing it doesn’t account for today’s market realities. He raises concerns about relying on historical data, especially given inflated equity valuations and rising interest rates. With stocks and bonds potentially falling together, he emphasizes the risk of inflation pressuring retirement withdrawals. Expect practical modifications that he personally employs to reduce risk in retirement spending, promising a fresh perspective for financial planning.
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Simplicity Masks Real Retirement Risk
- The 4% rule is simple: withdraw 4% in year one and adjust for inflation annually.
- Simplicity can mask serious risks like running out of money in retirement.
Historic Data May Not Predict Future Returns
- The Trinity Study used historical data from 1926–1992 to justify the rule.
- Relying on past performance may mislead investors given today's unique market valuations.
High CAPE Implies Weak Equity Returns
- Current high CAPE ratios suggest low future equity returns over the next decade.
- That implies equity growth may not cover retirement spending as assumed by the 4% rule.