The 4% rule is a popular option to calculate a safe withdrawal rate for retirement planning. But is the 4% rule the option you need to use to calculate a safe withdrawal rate in retirement. And if your are FIRE (financially independent retire early) or retiring later, you might be surprised how the 4% rule works for you.
00:00 – Start
00:43 – Calculate Money Needed
1:30 – What Is The 4% Rule
2:54 – Trinity Study Safe Withdrawal Rates
4:00 – Stock Market Historical Return
4:18 – Portfolio Example
5:42- 4% Rule Assumptions
6:46 – Flexibility
7:29 – Dynamic Spending Model
8:29 – Final Thoughts
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15 comments
Yea I agree, the return part is what concerns with with the 4% rule. For example, what if what happens if something like what happens in Japan happens?
I really liked the chart laying out withdrawal rates for different portfolios. Nice video!
Did you paint your walls? Something looks different…
Nope, for my situation. I will have income producing real estate. So my retirement account withdrawal rate will be variable, as needed.🏡
I haven't even watched the video yet but I clicked because of the low like percentage. Why are you guys so mad? It's a fair question given your retirement timespan.
Investing is all about offloading risk to someone else.
Blindly taking 4% from your funds each year puts 100% of the risk on YOU – why on earth are you doing that?
You need a steady stream of cash coming in monthly that is not dependent on the stock market or anything else. Annuities provide this – a monster insurance company can do better investing money than you can and if it should go belly up other insurance companies will step in and take over.
So your fixed expenses should come from a fixed stream of money that you can't screw up. Granted inflation can wipe this out but that same inflation will destroy just about every other form of investing too.
Money left over can be invested any way you want and if you screw it up at least your fixed expenses are taken care of.
4% is a good rule!! But the most important part is not to have a mortgage!! That’s my opinion
I don’t see how the 4% and the 25x aren’t the exact same thing
Im curious what everyone's definition of "retirement" is exactly? There is the implication that once you retire, there is zero earned income there on out, but especially when you "retire" early, what exactly will you be doing? I'm sure the answer is not "sit on my couch" but rather pursue your hobbies and dreams- i'd just argue couldn't you turn some of this activity into some earned income and therefore continue to contribute towards your retirement stash? For example, @Waller's Wallet, does that mean you wont make CC videos for us anymore? I sure hope not! Just saying that there is another few decades of life that you can still earn some income, but only secondary to pursuing your dreams and hobbies.
That old lady from Downton Abbey dropped both her monocles when bruh asked her to dip into capital. 😅
Orrrrrr bet all your money on YOLO out of the money GME options and if you hit it big, boom, instant millionaire
I really wish more of this was taught in school. It should be mandatory. I didnt start investing until my mid twenties. Thank God! I just hate that some people wont make this a priority until their mid 40s. I know some folks like that and they ALWAYS say they wish they would have started investing sooner. Great video Dustin!
I’ve seen other more recent historical modeling that shows 4% is not 100% safe like that table shows, it might be more like 3.25%. The main risk seems to be a steep market downturn in the first years right after retiring. earlyretirementnow.com (no affiliation) is an excellent resource for a deep dive into this topic.
I've never heard of this rule but will be putting it into place when retirement nears. Although, will it change in 30 years?? Great video Dustin, take care and keep the family safe!
I am 58 years old and retired. I plan to use the 4% rule