Welcome to DU! The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards. Join the community: Create a free account Support DU (and get rid of ads!): Become a Star Member Latest Breaking News General Discussion The DU Lounge All Forums Issue Forums Culture Forums Alliance Forums Region Forums Support Forums Help & Search

progree

(10,901 posts)
45. On the 4% rule -
Sun Jun 13, 2021, 10:32 AM
Jun 2021
What I don't get about the 4% rule, is increasing your payout each year depending on that year's inflation. I only every few years find a need to slightly increase what I take from my investment portfolio.


They are saying that 4% of the first year amount, and increasing that first year dollar amount by the inflation rate is safe from running out in 30 years, given one has their nest egg invested in 50% stocks and 50% bonds, based on simulations of the past market and inflation history over rolling 30 year periods.

It's not a suggestion or requirement, if one can take out less than that, all the better .

It's for people who are really dependent on their nest egg ... if they consistently withdraw much more than the thumb rule allows, then there is a real risk of that nest egg running out before 30 years, based on simulations AAII (American Association of Individual Investors) and others do. (They also look at longer periods and look at different stock-bond allocations too). Some say you can do 4.5% + inflation instead of 4.0% + inflation. Others caution that with stock valuations higher than ever and the bond yields being so dang low, 3.5% + inflation is probably the prudent maximum.

I have no idea what my withdrawal rate was or is, now with the charitable gift annuity (payments began December 2017, on top of Social Security (which began in March 2017) I'm pretty sure I'm putting money in, not taking money out of my investment/retirement accounts.

I'm glad you seem to be experiencing almost zero inflation. But most people I think I can safely say are not -- certainly there are and have been loud lamentations about price increases on DU since I've been around. (EDIT- More broadly, the CPI is based not just on prices of some list of items, but actual sales - i.e. what people actually buy and how much, so in aggregate they are experiencing these price increases).

I know I'm not experiencing near-zero inflation. I keep seeing rising dental bills for the basic cleaning and checkup, property taxes going way up, home owner association dues going way up (80% in 17 years which equates to 3.5%/year), my Medicare Supplement premium up 27% in 4 years (equates to 6.16%/year ). Medicare Part B premiums have increased from $78.20/month in 2005 to 148.50 now, which is a 4.1%/year increase). Car prices ...

According to the experts, the CPI-E for elderly people exceeds the basic CPI, mostly because out of pocket healthcare costs are exceeding the general rate of inflation, and it certainly seems to be true judging from medical premiums.

Fidelity does a study every 2 years on what an elderly 65 year old couple can expect to spend on average on out-of-pocket medical costs including Medicare premiums, and its up to $300,000 now (more specifically the amount they would need to have saved now to cover costs in the future).

May your good luck hold
How much you got? Asking for a friend. marble falls May 2021 #1
$1,900,000,000,000 give or take a few trillion nt doc03 May 2021 #13
So what's your motive for more income? ... marble falls May 2021 #14
Greed nt doc03 May 2021 #19
I posted before I was finished, please read it again, I made a serious reply. marble falls May 2021 #23
There are plently of guaranteed investments returning way more than 0.3 % drray23 May 2021 #2
Where in the world are you seeig a guaranteed 3%? I believe nowhere. NoRethugFriends May 2021 #3
thats why you have to work with advisors and financial managers. drray23 May 2021 #6
Looks like you have TIAA Traditional Abnredleg May 2021 #8
yeap. so am i (in academia) drray23 May 2021 #9
elsewhere its also offered under a different name. drray23 May 2021 #11
I am not familiar with the instrument Tomconroy May 2021 #17
well yes its not meant for you to get high returns. drray23 May 2021 #20
I think the company has figured out Tomconroy May 2021 #24
It appears you have a misunderstanding of what TIAA does and what an Annuity is. A HERETIC I AM May 2021 #37
He wrote .3% not 3% rickford66 May 2021 #21
No I wrote 3 % drray23 May 2021 #26
I put a group named Blooom in control of my 401(k), which is with another company. NBachers May 2021 #4
Are you retired? A HERETIC I AM May 2021 #36
I was reading an article today that Tomconroy May 2021 #5
I'm 71 and have been retired for 19 years. multigraincracker May 2021 #7
Send it to me in bitcoin. Chainfire May 2021 #10
I did look it up. The interest on US Savings bonds Tomconroy May 2021 #12
Thanks for the input. I have my IRAs Invested in Vanguard and T.Rowe Price doc03 May 2021 #18
Savings bonds you can cash out early. Tomconroy May 2021 #22
Remember the old days when they'd roll them over if you didn't cash them in? marble falls May 2021 #25
I went thru the 2008 and 1984 multigraincracker May 2021 #29
Odd the EE savings bonds suck so much (these are the ones without the inflation adjust) progree May 2021 #27
I do not believe that annuities are a good investment Tomconroy May 2021 #15
Annuities are essentially insurance products. A HERETIC I AM May 2021 #35
There are different kinds of annuities. PoindexterOglethorpe May 2021 #38
Some may compare annuity yields to those of bonds and CD's without understanding the differences progree Jun 2021 #40
My annuities will not die with me, if there is still any value left. PoindexterOglethorpe Jun 2021 #41
I'm guessing interest rates and annuity yields were considerably higher when you bought progree Jun 2021 #42
Yes, rates were somewhat higher then. PoindexterOglethorpe Jun 2021 #43
On the 4% rule - progree Jun 2021 #45
You can get 4% - 5% guaranteed return tax free calguy May 2021 #16
I haven't seen anything like 4% - 5% anywhere for a long long time, and municipal bonds are not a progree May 2021 #28
We might not be talking about the same thing. calguy May 2021 #30
Can new investors buy these, e.g. the EVM Eaton Vance California Municipal Bond Fund progree May 2021 #31
You just have to have an account with a stock broker calguy May 2021 #32
Thanks much 😂 I just went to Vanguard.com (where I have an account) progree May 2021 #33
Everything has risk bucolic_frolic May 2021 #34
I want to strongly second what bucolic_frolic said. PoindexterOglethorpe May 2021 #39
I have a majority of my money in four Vanguard funds bif Jun 2021 #44
Latest Discussions»Culture Forums»Personal Finance and Investing»I am retired and 73 years...»Reply #45