The 4% Drawdown Rule, introduced by William Bengen in 1994, serves as a guideline for retirees to withdraw approximately 4% from their retirement savings. This strategy has been particularly embraced by the F.I.R.E. movement, with members aiming to retire early while ensuring their funds last. Bengen's research found that a diversified portfolio, when withdrawn from at 4.2%, had a 90% chance of surviving for 30 years. Recently, the term '4%' has also been associated with various financial topics, including interest rates and projected inflation rates for the near future.
The 4% Rule, created by financial advisor William Bengen in 1994, suggests that a retirement portfolio can sustain annual withdrawals of about 4% for 30 years.
This model indicates that a diversified portfolio facing market fluctuations has a 90% success rate for retirees if withdrawals are kept to 4%.
4% is also significant in other financial aspects, including how it can represent interest rates or inflation rates that affect investment strategies.
The rise of the F.I.R.E. movement has popularized the 4% Rule among younger investors looking to retire early and maintain sustainability of their funds.
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