William Bengen: The 5% Rule for Retirement Spending (EP.135)

At a time when the financial community provided inconsistent retirement advice, the 4% withdrawal rate was a data-backed strategy that revolutionized retirement planning. Today we speak with William Bengen, a literal rocket scientist and the influential personal advisor who popularised the 4% withdrawal rate, A.K.A, the 4% rule. After exploring what the 4% rule entails and the impact that it had on the financial industry, we talk about updates that William has made to his theory since first publishing about it in 1994. We then unpack more of the rule, talking about its conservative nature, whether young retirees should adhere to it, and if there are situations where you should break the rule. Reflecting on criticisms of the 4% rule, we ask William about how it fits with the notion of dynamic spending. His answers highlight his approach in helping his clients to maintain the same lifestyle that they have when they enter retirement. Later, we touch on tips to keep track of your expenses, whether you should taper your retirement income, the role of bonds and small-cap stocks in your portfolio, and William’s view that financial planning should be fee and not commission-based. We wrap up by discussing William’s career and how he defines success for himself. For more insights into the 4% rule from the man who created it, tune in to hear our incredible conversation with William Bengen.

Key Points From This Episode:

• Introducing today’s guest, financial advisor and 4% rule creator William Bengen. [0:00:15]
• Exploring William’s original 1994 research that led to the 4% rule. [0:03:58]
• Hear why the 4% rule has been so impactful to the world of financial planning. [0:05:06]
• William shares details about the ‘hate mail’ his findings inspired. [0:06:07]
• Why William updated his theory to include small-cap stocks. [0:07:43]
• William’s view that you might be able to get away with withdrawal rates that are higher than 4.5%. [0:08:26]
• Whether young retirees should adhere to the 4% rule. [0:11:48]
• The scenarios that break the 4% rule. [0:13:02]
• How the 4% rule applies in countries outside of Canada and the US. [0:13:55]
• Insights into how much you should be spending in your retirement. [0:15:28]
• What your triggers should be if you want to deviate from the 4% rule. [0:17:45]
• William’s views on dynamic spending. [0:20:09]
• Tips on keeping track of your expenses and William’s throughs on fixed annuities. [0:21:20]
• Whether you should taper your retirement income. [0:22:54]
• The role of bonds versus small-cap stocks in your retirement portfolio. [0:24:04]
• From rocket scientist to financial advisor, hear about William’s extraordinary career. [0:28:29]
• Reasons why financial planning should be fee and not commission-based. [0:32:02]
• Reflecting on the impact that William has made on his client’s lives and in the financial world. [0:32:55]
• Details on William’s current research and what most excites him. [0:34:48]
• How William defines success for himself. [0:37:01]