Questioning the 4% Retirement Withdrawal Rate

Is the 4% retirement withdrawal rate right for you? If you ask a conventional financial planner, the answer may be yes. If you ask an expert in finance, the answer may surprise you. That’s the point of  this article advocating replacement of the 4% withdrawal rate rule with something more scientific.

< I have never embraced the 4% rule for retirement income planning. It’s too easy, too simple. It can lead to mistakes, including underspending and/or overspending. If you like the comfort and simplicity of a rule of thumb, the 4% rule is as good as any. But if you have the time and intellectual curiosity to explore more flexible yet precise retirement income strategies, definitely investigate them, including on this site.

Further to the subject of retirement income, the AARP warns us that boomers could experience higher tax burdens in retirement. I will be writing more about this topic but it’s not too soon to be planning your future income streams to include a tax-free component.

Income annuities continue to evolve so as to lessen concerns about fees and liquidity (loss of principal to due early death). I find it interesting to know what professional financial advisers think about single-premium immediate annuities. Thought number one is that they attract baby boomers who are scared to death of the market. Duh.

Apparently Canadian baby boomers are also pushing back on the concept of retiring without a mortgage. I like the reference in the article to the views of a Canadian actuary who believes that comfortably living on 50% of your pre-retirement income is doable, if there is no mortgage to contend with.

Finally, check out this week’s Carnival of Personal Finance and Baby Boomers Blog Carnival.


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