How Does the 4 Year Rule Work?

Nov 26, 2025

Corey Hoffstein, co-founder and CEO of Newfound Research, shares his expertise on return stacking and its relation to leveraging investments. He explains the intricacies of how stacking works and discusses practical use cases. The conversation also dives into managing leverage responsibly and the importance of diversifying with liquidity in mind. Corey elaborates on the Four-Year Rule for retirement cash to prevent forced selling during downturns, and he offers insights on building wealth over time, even for late starters.

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INSIGHT

Return Stacking Concept

Return stacking layers diversifiers on top of core stocks and bonds using modest leverage to boost expected returns.
It aims to increase return while maintaining or reducing overall portfolio risk by adding uncorrelated exposures.

ANECDOTE

Origins Of Return Stacking

Corey Hoffstein recounts that the term came from his colleague Rodrigo Gordillo and parallels institutional Portable Alpha.
He highlights this approach has existed since the 1980s at firms like PIMCO.

INSIGHT

How Futures Enable Leverage

Using futures lets you gain full bond exposure while posting only small collateral, creating embedded leverage.
The embedded cost of that leverage approximates short-term rates like the Fed funds rate or T-bills.

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