Skip to main content
No. of Recommendations: 3
From what I understand, you have been taking 4% of the 2000 year value all this time?

This is the correct interpretation of the SWR studies.



I adjust the 4% withdrawals every year to the end of year (12/31) statement. Actually, I don't withdraw 4% for income, but leave some for emergencies and large purchases. When I buy a car, I pay cash, hope for no interest loan and keep the car for at least 7 years before thinking about replacing it. I don't think you can take 4% of an amount you no longer have, so you are right in thinking to adjust withdrawals. And I would do that again 12/31/08, because there might be even less available. That said, I am trying to withdraw a little as possible at this time.

All of the correctly performed studies state that you take withdrawals in the manner the OP described -- you take 4% (or whatever your specific situation allows) of the initial amount and then increase your withdrawals with inflation. You do not adjust the 4% based on the new balance each year. The former keeps the standard of living constant from one year to the next; the latter means your standard of living can change dramatically.

The whole point of a SWR study is to give a limit that will survive the market ups and downs. The fact that the market has declined does not mean you have to drop the SWR; it simply means the risk that you are in one of the "danger-zone" cases has been increased.

Acme
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
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.