No More 4% Rule?
For 25 years, the 4% rule was carved in stone as the rule that retirement investors rested their golden years on. However, that rule is no more. It’s always upsetting when something you view as the truth turns out to have flaws. Today, host Rob West and Steve Moore talk about the 4% rule and other retirement planning.
· The 4% rule is the idea made by Bill Bengen that you have to adjust your budget so that you never withdraw more than 4% a year from your investments. This is supposed to guarantee that your retirement savings will last at least as long as you do.
· Bengen now says the average safe withdrawal rate is around 7% and could be as high as 13%, but we aren’t recommending that anyone withdraw that much.
· The new rule, according to Bengen, is 5%. Bengen says he uses the 5% figure for his own retirement planning.
· 5% isn’t a huge change percentage wise from 4%, but the money difference could be significant.
Here are a couple of questions we answered from our callers on today’s program:
· What is your opinion on permanent life insurance as a tax shelter for later?
· I have around $80,000, half of which is in a Roth and the other half is inherited. I went to an advisor and they told me I could put more money into the Roth, but a different advisor said the opposite. What do you suggest?
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