The 4% Safe Withdrawal Rate Misconception
Submitted by Legacy Financial Group on June 12th, 2013There has been much discussion lately on the reliability of the suggested 4% withdrawal rate. It has long been held that withdrawing 4% from your retirement assets per year was a “safe” withdrawal rate. “Safe” means if the retiree starts taking 4% out of their portfolio when they retire and increase that amount by inflation each year then that income will last them the rest of their life. 4% became a rule-of-thumb even though it actually has strong academic backing. Recently, however, online articles and general advisor talk have suggested that given the current low rate environment or due to big market collapses like 2008 and 2009 a 4% withdrawal rate is no longer feasible.