The Money with Katie Show The Most Dangerous Misconceptions about the 4% Safe Withdrawal Rate
5 snips
May 4, 2022 AI Snips
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4% Rule Is A Guideline
- The 4% withdrawal rate is a guideline based on historical worst-case market data, not a guaranteed rule.
- It accounts for sequence of returns risk, ensuring sustainability over 30 years even in the worst financial periods.
4% Rule Withdrawal Method
- The 4% rule sets withdrawal as 4% of the portfolio value in year one, then only adjusts for inflation each following year.
- It does not recalibrate withdrawals based on annual portfolio value fluctuations, protecting retirement funds during downturns.
4% Rule Holds In Low Bond Yields
- The 4% rule worked consistently over the worst 30-year retirement period, including times with low bond returns.
- The rule is based on historical periods where bond yields were often below 4%, disproving claims it only works during high interest environments.