Paco Dennis
SF VIP
- Location
- Mid-Missouri
"New research uses more realistic assumptions and reaches a far lower estimate of what we can safely spend each year in retirement
Retirees and near-retirees have known for some time that the famed 4% rule needs to be revised downwards. But by how much?
Would you believe 1.9%? That’s the conclusion of new research that replicates the original research that led to the 4%, but with more realistic assumptions about our life expectancies and a more comprehensive historical data set.
The implications are huge and potentially devastating. Under the 4% rule, a $1 million 401(k) would allow you to spend an inflation-adjusted $40,000 each year in retirement with minimal odds of outliving your money. With the new rule, you would be able to spend an inflation-adjusted amount of just $19,000 per year.
And that’s assuming you have a $1 million retirement portfolio. According to the most recent analysis by Vanguard, only 15% of retirement accounts at Vanguard are worth even $250,000. And according to an analysis of Federal Reserve data by the Boston College Center for Retirement Research, only 12% of workers have any retirement account in the first place."
4 min. read
https://www.marketwatch.com/story/f...ending-rule-would-you-believe-1-9-11664559109