What is the 4% rule in retirement planning?

@paolo.leuschke 

The 4% rule is a general guideline used in retirement planning to determine a safe withdrawal rate from a retirement portfolio. It suggests that retirees can withdraw 4% of their initial portfolio value in the first year of retirement and then adjust the subsequent annual withdrawals for inflation in the following years.

The rule is based on a study conducted by financial planner William Bengen in 1994. Bengen analyzed historical stock and bond market returns, considering different retirement periods, and found that a 4% withdrawal rate provided a reasonable probability of sustaining a portfolio for at least 30 years without running out of money.

The 4% rule assumes a portfolio mix of stocks and bonds, with the stocks providing long-term growth potential and the bonds providing stability and income. It is important to note that the 4% rule is not a guarantee and may not be suitable for everyone. Factors such as individual risk tolerance, market conditions, and personal circumstances should also be considered in retirement planning.

@paolo.leuschke 

The 4% rule in retirement planning is a guideline that suggests retirees can withdraw 4% of their initial retirement portfolio balance in the first year of retirement. They can then adjust the subsequent annual withdrawals for inflation. This rule is based on a study conducted by financial planner William Bengen in 1994, which analyzed historical market returns. The 4% rule aims to provide a high probability of sustaining a retirement portfolio for at least 30 years without depleting it prematurely. However, individual factors such as risk tolerance and market conditions should also be considered when determining a withdrawal rate.