Why the 4% withdrawal rule may not be safe

Women should instead budget for 3.6% or less for retirement withdrawals

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From the September/October 2014 issue of the magazine.

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Retirement expert Moshe Milevsky hates the 4% rule. The decades-old maxim states that you can withdraw 4% of your nest egg each year after you retire and you’ll never run out of money. But Milevsky says for most individuals, it’s just not true. Sure, if you’re male, you retire right at 65 and you’re completely average, then it applies, he says. “But what’s average?” The rule doesn’t apply to women at all, he notes, because they live longer, so they’re more likely to run out. As the chart below shows, “average” women should instead budget for 3.6% or less to be safe.

4rule

Assumptions: Initial withdrawals are increased annually for inflation. Portfolio is invested 50% in stocks and 50% in bonds, and the inflation rate is 2%. Source: M. Milevsky and F. Habib, CANNEX

 

5 comments on “Why the 4% withdrawal rule may not be safe

  1. Hmm – not very much information in this “article”… I’d like to see more information and justification of his statements…

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  2. This is very nice, except that by 71 you HAVE TO withdraw over 7%, whether you are man or woman.

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    • You are speaking of withdrawals from a RRIF. Those withdrawals are mandatory, yes, and taxed as income BUT – you do not have to spend it. This article is referring to money that is withdrawn from one’s total liquid assets and SPENT.

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  3. INCREASE THE AGE ON THE x AXIS TO 71/72 AS PER RIF REQUIREMENTS

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  4. Why didn’t this list the assumption for annual portfolio return instead of portfolio asset class breakdown? The allocation doesn’t matter at all to what the article is trying to say. The 4% rule is a generalization–it’s widely accepted that 3.8% is the ideal drawdown.

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