The 4% Rule Has This Flaw All Retirees Should Know About
Before you assume it's right for you, get the full picture.
Overview
The 4% rule has long been considered one of the simplest ways to estimate how much you can safely withdraw from your retirement savings over time. Under the rule, you withdraw 4% of your portfolio during your first year of retirement and then increase that dollar amount each year to keep up with inflation.
For example, if you retire with $1 million, under the 4% rule, you'd withdraw $40,000 your first year. If inflation rises 1%, you'd withdraw $40,400 the next year. And repeat.
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Source
Originally published at www.fool.com.
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