No. of Recommendations: 4
Why 4 percent, precisely?

AFAIK (and I will admit I haven't read the info myself, although DH has), analyzing data over a long period of time (something like 100 years - intercst, I apologize for butchering your research!) reveals that - no matter how lousy the economy was in any particular year - 4% would have been a safe rate at which to withdraw money from one's savings to ensure that one did not approach $0 (in 40 years, I think?). Certainly it's a conservative approach, but if you're not overly optimistic about the economy (we're not), it can help you sleep at night.

People need to use their heads and their calculators, and do what works for THEM

Well, yes, of course - but people also need to be relatively comfortable that their money is not going to run out. Since you and your wife are living largely on social security, it's definitely less of an issue for you. We've got 9-13 years to go before retirement, and we're not counting on SS existing at all. In order for us to be able to retire and actually relax, we want to save enough to make that 4% safe withdrawal rate workable.

And if we end up leaving a big chunk to our kids? That's actually OK with us. We're not planning on depriving ourselves in retirement either way.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.