The 4% Rule at a Discount
The 4% rule has an 85% rate of success!
This rule is widely popular among wealth managers and advisors as a safe withdrawal rate for a 30-year retirement strategy starting at age 65.
It’s based on William Bengen’s research in the mid-1990s, which was formulated from historical financial market returns. The 4% rule is a simple rule of thumb rather than a hard and fast rule for retirement income. Many factors influence the safe withdrawal rate, such as risk tolerance, tax rates, market fluctuations, and inflation.
⚡️ Read that again: The 4% rule has an 85% success rate, meaning your money has an 85% chance of lasting until age 95.
💡Let’s take a look. If someone needs to build an income of $40,000, simple math tells us we need a nest egg of $1,000,000, assuming the income ratchets up each year to account for inflation.
What if the client doesn’t have that dollar amount readily available? A deferred annuity with a guaranteed lifetime withdrawal benefit can generate the same $40,000 for only $534,000. And the client didn’t give up control of their dollars to do it
