I’ve been a long-term critic of 4% as the “safe spending rate” or the 4% rule. The basic premise of the 4% rule is that to ensure your nest egg lasts through retirement, you should withdraw no more than 4% the first year and increase it by the inflation rate each year after that. This article reveals the latest criticisms of the 4% rule and also quotes some advisors who make the argument that the 4% rule really wasn’t supposed to be anything more than a communications tool.
Evan Inglis, fellow of the Society of Actuaries, and senior actuary at Nuveen Asset Management in the District of Columbia, pegs the real retirement withdrawal figure at 3 percent.
“Future investment returns are likely to be low for some time to come and this means that retirees will want to be conservative in their approach to spending from their savings,” he says. “In general, retirees can spend 3 percent of their assets in a year (over and above Social Security, pension or annuity income).”