http://finance.yahoo.com/news/4-solution-retirement-doesn-t-...Nobody that I know of ever said that 4% was a firm and fast rule that would be perfect for all people all of time. It's a rule of thumb, a good benchmark. But, leave it to the financial advisors (aka, crooks) to try to make it so complex that normal folk would feel compelled to seek their expert advice. It's like low expense ratios: They're good for your porfolio. It's like high fees and expenses: They're bad for your porfolio. 4% is as good as any rule of thumb, to be adjusted as needed for each individual, using simple common sense.
ResNullius:<<< http://finance.yahoo.com/news/4-solution-retirement-doesn-t-......Nobody that I know of ever said that 4% was a firm and fast rule that would be perfect for all people all of time.>>>From the URL: "But the approach of choice for many financial advisers happens to be the 4% plan, which, in essence, says you can realistically afford to spend 4% of your wealth in retirement each year."First, the article does not even state the 4% SWR accurately (which was 4% the first year, adjsuted by inflation annually thereafter - NOT 4% of the total balance, which may generate decreases in annual income if the returns on the portfolio are bad), and second it ignores the caveats that go with the SWR, survival defined as 30 years, and a portfolio allocation of, IIRC, 60% equity index fund and 40% MM/fixed income funds.Second, I agree with your first statement - "Nobody that I know of ever said that 4% was a firm and fast rule that would be perfect for all people all of time."Regards, JAFO
Personally I've always looked at the 4% burn rate as a guideline and as implying 25x living expenses as the minimum you can consider retiring on. It is merely a ballpark starting point for further refinements.You can certainly see how the low interest rates of today can be a problem for those who invest conservatively and still try to adhere to the 4% rule. I like the idea of an 8%/yr total return target. Then spending half your income and saving half looks far more reliable.But the bottom line still is, if you don't use the 4% rule what do you do? Keep working until you can retire on dividend income? At least 4% shines a light on a strategy that can let you retire a bit sooner and with reasonable chances of covering your expenses for life.