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No. of Recommendations: 1
After the initial 4% withdrawal (actually Bengen has revised to 4.5%), when you start calculating the inflation-adjusted ones, is the multiplier the "percent change from 12 months ago" from the BLS CPI-U:

https://www.bls.gov/regions/mid-atlantic/data/consumerpricei...

For instance, if you're taking one yearly withdrawal each January 1st, then for January 2019 you would've used 1.9% (the December 2018 YoY change).

Or if you're taking one yearl withdrawals each July 1st, then for July 2018 you would've used 2.9% (June 2018 YoY change).

Curious how people use the numbers.
No. of Recommendations: 0
I've been using the January to January CPI number.

intercst
No. of Recommendations: 3
Are people really that stuck on the "4% rule" where a 1% difference up or down in their income in one year is that important?
I look at it as a guideline...some years you are going to go over. So some years you need to go under.

It is truly math in slow motion...recompute every so often and adjust, as required. The odds are you will have extra just by knowing about the 4% rule and sort of following it.

The math behind the 4% rule guarantees, with a very high probability (90% or maybe 97%??) that you will end up with money left over after 30 years.
IMO, the only ones that need to pay exact close attention to how they compute inflation and CPI are those involved with large numbers of people, such as pensions, SS, etc.

If you have \$1M in savings you are starting by withdrawing \$40K per year. The difference between withdrawing 2% more or 3% more in the second year is \$40,800 vs 41,200 or \$400. Sure, if you do this every year for 10 or 20 years the difference is sizable. But you do get a chance every year to look at what your balance is doing and what the market is doing and make adjustments -- you aren't forced to take a raise every year. If you have significantly more than \$1M or \$2M then your numbers are bigger than a \$400 difference and you are probably doing OK anyway.

Mike
No. of Recommendations: 7
Are people really that stuck on the "4% rule" where a 1% difference up or down in their income in one year is that important?

The thing is, a 4% withdrawal vs. a 5% withdrawal isn't a 1% difference up in their income - the 5% withdrawal is a 25% increase in their income vs. a 4% withdrawal, and a 4% withdrawal is a 20% decrease vs. a 5% withdrawal.

I look at it as a guideline...some years you are going to go over. So some years you need to go under.

Until you hit 70 1/2 and the IRS starts dictating what you remove from tax advantaged accounts, that's correct - but even then, as many have said, you don't have to spend the entire (or even any) of the RMD - you can always invest it in a taxable account.

If you have \$1M in savings you are starting by withdrawing \$40K per year. The difference between withdrawing 2% more or 3% more in the second year is \$40,800 vs 41,200 or \$400.

Yes, but that's 4.08% vs. 4.12%, not 4% vs. 5%

AJ
No. of Recommendations: 5
<<Are people really that stuck on the "4% rule" where a 1% difference up or down in their income in one year is that important?>>

The thing is, a 4% withdrawal vs. a 5% withdrawal isn't a 1% difference up in their income.

</snip>

I think the OP is talking about a +/- 1% in the inflation adjustment, not the 4% withdrawal rate.

(e.g., 3% inflation on a \$40,000 withdrawal = \$1,200, 4% inflation = \$1,600. \$400 isn't a lot.

intercst
No. of Recommendations: 1
Intercst is right. The post was about an inflation adjustment difference of 1% not a 4-5% overall withdrawal rate. See the math in my post.

Mike
No. of Recommendations: 1
I look at the % increase in Social Security payments.