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Subject:  Re: Retirement Needs Formula? Date:  10/6/2013  6:57 PM
Author:  culcha Number:  73464 of 87983

I always took the 4% rule as 4% of portfolio that year. Rinse, wash, repeat, always taking just 4%. Some years more, some years less.

Usually, the 4% is only the initial take. The take in subsequent years is increased by the amount of inflation. Studies calculate the "safe withdrawal rate" based on the possibility that your portfolio would reach zero at some point before you die.

The primary fear this approach addresses is the idea of "outliving your assets." But OTOH if you only take the same 4% each year (even though it will buy less and less as inflation marches on), the withdrawal will be "safe" in the sense that you never have your portfolio go down to zero, but sometimes the annual withdrawal (or "take") will be very small indeed (and will almost certainly have far less purchasing power than the same amount of dollars did in early retirement).

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