"For decades, the 4% rule has been the gold standard among many financial professionals for managing a retirement portfolio. It says that if you withdraw 4% of your portfolio in your first year of retirement and adjust subsequent withdrawals to account for inflation, your money should last 30 years - even if market volatility ensues during that period. But while the 4% rule may be a good benchmark to work with, it could also leave you short on income."
"It's okay to aim higher A 4% withdrawal rate might seem like a good starting point for your portfolio. But unless you have a lot of money, it may not give you the annual income you're after. Let's say you have $1 million saved, which is arguably a decent sum of money. The 4% rule only allows you to withdraw $40,000 a year."
The 4% rule prescribes withdrawing 4% of a retirement portfolio in the first year and adjusting for inflation so principal and income should last about 30 years despite market swings. That rule assumes a roughly balanced stock-and-bond allocation and can produce modest income — for example, a $1 million portfolio yields only $40,000 annually. Retirees seeking higher income can pursue portfolios with assets offering greater growth and implement guardrails to mitigate volatility. Combining higher-growth investments with risk-management strategies can support withdrawal rates above 4% while addressing longevity and income needs.
Read at 24/7 Wall St.
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