Tuesday, May 12, 2015

The 4% Retirement Withdrawal Rule

The New York Times has a good article on the old rule of thumb that you should spend about 4% of your assets per year in retirement.  This rule, invented by an engineer I might add, actually turns out to be a pretty good guideline for spending in retirement.

Our spending follows this pattern and our assets have stayed approximately constant over about 17 months of retirement.  This is primarily due to the performance of the stock market.  We don't directly use the 4% rule, it just turns out that our retirement plan showed us that we should spend about 4%.

If you want to check your spending plan for retirement against a more complex model, I still recommend using the Vanguard Monte Carlo tool, that I covered in this blog post.

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