"The single biggest problem with static withdrawal rules assumes that the future is going to look like the past, which is not the right assumption to be making moving deeper into 2026. In fairness, the 4% rule was stress-tested against historical data, including the Great Depression and stagflation in the 1970s, and it survived. The thing is, it wasn't designed or tested for the kind of environments we've been swinging between over the last 6 years,"
"The heart of the matter is that static rules have long forced people to withdraw the same inflation-adjusted dollar amount every year, even when their portfolio is down 20%. This is sequence-of-returns risk in action, and it's the fastest way to drain a retirement account. If you retired in early 2022 with $1 million and started withdrawing $40,000, when inflation jumped up in 2023 to 8%, you were pulling $43,200 from an account that was already worth less."
The 4% withdrawal rule, which sets an initial 4% portfolio withdrawal and inflation-adjusts that dollar amount annually, rests on historical assumptions of steady returns, predictable inflation, and stable interest rates. Recent years have shown large swings—nearly 9% inflation in 2022 then about 2.7%—and periods when stocks and bonds fall together, undermining a 60/40 portfolio. Static rules force constant inflation-adjusted withdrawals even during large portfolio declines, amplifying sequence-of-returns risk and rapidly depleting assets. Flexible withdrawal strategies adjust withdrawals based on market conditions and portfolio health to reduce ruin risk and preserve retirement longevity.
Read at 24/7 Wall St.
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