In 'Enough: True Measures of Money, Business, and Life,' John C. Bogle reflects on the excesses of the financial system, particularly in the context of the 2008 crisis. The book is divided into three sections: Money, Business, and Life. Bogle discusses the importance of long-term, client-first approaches and the need to redefine success beyond mere financial gain. He emphasizes values such as trust, stewardship, character, and contribution, and argues against the destructive nature of greed and blind ambition. The book includes a foreword by William Jefferson Clinton and is written in a straightforward and accessible style[1][3][5].
I had the pleasure of speaking with Bill Bengen, creator of the "4% Rule" for retirement planning. Bill has been a reader of Financial Samurai for many years and has always been courteous in the comments section when I write about safe withdrawal rates. So, I figured it was time we had a chat to clear up some misconceptions.
For those unfamiliar, the 4% Rule, developed by Bill in the 1990s, suggests that traditional retirees (around age 65) can safely withdraw 4% of their retirement portfolio in the first year—adjusted for inflation in subsequent years—without running out of money over a 30-year period.
Misconceptions About The 4% Rule Cleared Up By Bill Bengen
Here’s what I learned from Bill that helped clarify the 4% Rule:
- Not a Hard “Rule”: Bill considers the 4% Rule more of a guideline than a strict rule. He encourages flexibility with withdrawal rates, though it’s often treated as a rigid rule in the public eye.
- 4% Isn’t Actually Aggressive: Contrary to popular belief, Bill’s data shows that 4% is actually conservative. In his study of 400 retirees since 1926, only one retiree (who retired in 1968) had to stick to a 4% rate to avoid running out of money. The rest withdrew an average of 7% without depleting their portfolios.
- Adjusting for Inflation: The 4% Rule isn’t static; it adjusts with inflation. For instance, if you start with a $1 million portfolio and withdraw $40,000 one year, you would adjust that amount by inflation the next year to $44,000. This means your withdrawals fluctuate with your financial needs and economic conditions.
You can e-mail bill at Bill@begenfs.com if you have any questions.
Posts mentioned:
Misconceptions About The 4% Rule With Bill Bengen
The Proper Safe Withdrawal Rate
Finishing Rich In A Low Return Stock Market Environment
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