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4% Rule Origin and Purpose
- The 4% rule, originating from a Trinity University study, helps determine retirement portfolio needs.
- It accounts for sequence of returns risk, where early negative returns can deplete portfolios faster.
Handling Pensions in Retirement Planning
- Treat pensions and Social Security as reducing retirement income needs, not portfolio assets.
- Calculate portfolio needs based on inflation's impact on pension shortfalls over time.
4% Rule and Taxable Accounts
- No adjustments to the 4% rule are needed for taxable accounts.
- Taxes are factored into the withdrawal rate, similar to advisory fees.