© Reuters 4% Rule: Rumors of my death have been greatly exaggerated
The 4% rule, which states that you can safely withdraw 4% of your retirement savings each year and adjust for inflation, has been the gold standard for retirees asking how to make their money last until they die. However, with the Fed holding interest rates artificially low for years, the rule has been put into question with some stating it should be 3% or even lower. Now, Morningstar is telling retirees that “The 4% rule may finally hold true as a safe starting withdrawal rate when considering a 30-year time horizon.” This is the firm’s highest safe withdrawal percentage since it started the research in 2021. The firm’s findings suggest that new retirees using the rule have a 90% probability of still having funds remaining after the 30-year period.
What is the driving force behind this change? With the rise in yields for bonds and cash, the future projections for portfolio returns have improved, Morningstar said. Consequently, the potential safe withdrawal amounts for new retirees over a 30-year span have gradually increased. Additionally, a more restrained inflation forecast of 2.42% this year, compared…
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