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Rekenthaler Report

The Math for Retirement Income Keeps Getting Worse

Revisiting the 4% withdrawal rule.

The Catch
The good news for upcoming retirees is that their investments have soared. Large-company stocks have recorded highs, smaller-company and international stocks are approaching their previous peaks, and bonds have never been costlier. It has been a great time to own financial assets. The bad news is that as these investments become pricier, their yields have shrunk, which reduces the percentage of their value that retirees can withdraw during retirement.

This, of course, is not a new phenomenon, as--despite March's violent but brief interruption--the Great Bull Market is in its 13th year. (Coincidentally, at almost the very hour that this column was posted, Rafael Nadal occupied the red clay of Paris, competing in the semifinals for his 13th French Open title.) Indeed, on July 31, 2013, in response to articles from both The New York Times and The Wall Street Journal, I published a column on this very topic, entitled "Is 3% the New 4%?"