Ryan shares SRP’s perspective on the reliability of the “4% plan” in retirement.
SRP’s Approach to Annual Withdrawal Rate
There is a lot of research available on the validity of the 4% withdrawal rate in retirement. The idea is that, in any market season, there is a target withdrawal rate of 4% annually that allows for a consistent and comfortable lifestyle in retirement. This idea has been challenged and new information suggests that you only need withdraw as low as 2% up to 6%.
With that said, we like to stick to these guidelines:
- The older you are, the more you can take out from your portfolio annually. This is due to the fact that you have less life left to live than if you were 10 years younger.
- Depending on the market season currently, you shift how much you withdraw. In a good market, you can actually withdraw a bit more than you would in a poor market.
