June 17, 2014 by Warren S. Hersch
As a guide to retirement income planning, the 4 percent rule
clearly needs to be revisited, as this article suggests. Based on a 75-year
analysis of stock market returns and retirement scenarios, the rule surmises
that retirees who withdraw 4.2 percent of their investment portfolio in the
initial year of retirement, then adjust withdrawals in subsequent years to
account for changes in the inflation rate, can reasonably expect to have enough
money to carry them through retirement. But given current market conditions,
including record-low interest rates, a two percent withdrawal rate, as many
advisors now believe, is the more realistic benchmark to live by. - Warren S. Hersch.
