The 4% Myth

Retirement isn’t something most people like to think about, but it’s an important thing to think about regardless. Americans today need to have enough assets at the time of retirement to live comfortably, and that can be hard to do if they have poor returns in the early years of retirement. The vast majority of Americans really need to be more conservative in terms of how much they withdraw during

 retirement because that fabled 4% that’s always been quoted as the annual withdrawal rate is really not a safe bet anymore. Now, the average person can really only live comfortably at a withdrawal rate of 2% or under each year.

 

You have to understand that the oft-quoted 4% rate is really just an estimate, a guess. It doesn’t take into account things like investment fees or longer-than-average lifespans, which, by the way, more and more Americans are enjoying these days.

It’s also important to understand that, while that 4% rate has been around a very long time, that’s precisely the problem with it. It’s old and outdated, and in many ways, that makes it irrelevant to today’s modern and rapidly changing world. Don’t let some old, practically arbitrary figure tell you what to do or dictate your life; base your decisions on what’s happening in the world now, today!

 For help determining just how much you should actually withdraw and at what points in your retirement, your best bet isn’t just to go with what you’ve always heard or been told. Instead, it’s to sit down with your financial advisor, look over your finances and personal situation, and then make smart, informed decisions based on that information. That is what is truly going to help you and benefit you the most both now and in the long run as well.

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