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How Taxes and Debt Upend the 4% Retirement Rule
The overused and oversimplified 4% rule is misused so often that it’s important to understand what it means, particularly as it relates to inevitable large single event expenses or tax and debt payments. The 4% rule implies that a new retiree can spend 4% of the retiree’s savings the first year and increase that amount by last year’s inflation until death, at which point the savings will be nearly exhausted. Of course this would be financial suicide should the investment markets crash shortly after retiring, or if the retiree had a very long life, or if the retiree had some extraordinary costs at some future point, or for many other reasons. Read More…
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