When the 4% Rule Fails
The future could be a lot less happy than the past.
The Tin Lining
Last month’s column, “Don’t Believe the Retirement Defeatists” gave the happy talk. If retirees apply common sense to the overly rigid withdrawal rules used by computer simulations, and relax the stern requirement that they achieve 80% of their pre-retirement income for a full 30 years, much retirement advice looks to be too conservative. Despite the many articles to the contrary, retirees should be able to withdraw at least the rule-of-thumb of 4% annually, and perhaps significantly more.
That was accurate enough, as far as it went. But it presented only one side of the story. (Such is the nature of a 1000-word column; as with the picture that equals its words, it gives but one perspective.) Another side is more worrisome.
John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.