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BiggerPockets Money Podcast

Is the 4% Rule Dead?

Mar 21, 2025
Is the 4% rule still a reliable retirement strategy? Experts reveal why many FIRE enthusiasts are misusing it and risking their financial future. They discuss the importance of adjusting portfolios, especially in a volatile market, and share strategies to protect wealth during downturns. Listeners will learn about the historical significance of the 4% rule and why diversification is essential now more than ever. Plus, insights into gold prices and alternative investments like real estate offer a roadmap to maintaining financial stability.
43:08

Podcast summary created with Snipd AI

Quick takeaways

  • The 4% rule remains mathematically valid, but many FIRE-chasers misconfigure their portfolios, risking their financial independence during downturns.
  • Diversification and alternative income sources, such as real estate and side businesses, are essential for bolstering retirement security against market volatility.

Deep dives

Understanding the 4% Rule

The 4% rule serves as a guideline for determining the amount of money needed for retirement, positing that a well-structured investment portfolio can sustain a consistent withdrawal rate without depleting funds. Historically, portfolios with a mix of stocks and bonds, typically in a 60-40 allocation, have shown resilience during various economic downturns, allowing retirees to withdraw 4% annually without exhausting their savings over a 30-year period. Even in challenging times, such as the Great Depression or the high inflation of the 70s, simulations have demonstrated that most retirees began with a certain amount, often ended up with more wealth after 30 years. The original research by Bill Bengen in the 1990s has since been supported and expanded upon by financial experts, affirming that this rule remains mathematically sound despite ongoing debates.

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