"This leads to many different strategies, including the 8% drawdown approach from Dave Ramsey, which has plenty of fans but also many detractors. For retirees, embracing an income-first approach with dividends is a shift from depletion to durability, and instead of worrying about how long savings will last, it shifts toward a focus on a more secure and comfortable retirement."
"For as long as most of us can remember, investors have been taught to use systematic withdrawals, such as the popular 4% rule, to help fund retirement. The real truth is that even though millions follow this rule, it also allows you to chip away at your principal every year, and during significant bear periods, it can leave you particularly vulnerable to losing a lot of your compounding strength."
Retirees often worry about whether savings will last after stopping paychecks and consider multiple strategies. Popular options include systematic withdrawal rules like the 4% rule and more aggressive plans such as an 8% drawdown. Systematic withdrawals reduce principal each year and can damage long-term compounding, especially during prolonged bear markets. Dividend-focused, income-first strategies generate cash flow from investments rather than selling assets. Such an approach preserves capital, allows continued compounding, and shifts retirement planning from depletion concerns toward a more durable, secure, and comfortable income stream.
Read at 24/7 Wall St.
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