pensionsweek

The 4% retirement rule states that you should continue to build your retirement nest egg until you have a balance large enough to support withdrawing 4% of initial balance each year. What Is The 4% Rule? A simple example is that if your liquid net worth at time of retirement was $1 Million, you would plan to withdraw $40k each year. This model was developed to bring simplicity to the question of when do I have enough to retire? People are comfortable understanding what their current income levels are, and answering the question of whether they could have an enjoyable life at the 4% distribution rate. However, this simplified framework doesn’t work. The stakes are too high to not fully understand all assumptions at play. The faulty assumptions that underpin this framework are listed below: Asset Allocation Plays a Large Role Alternative Investments are Key Distribution and Dividend Income are Under Considered Large Expenses Early Inflation: You have to Be Precise Fees and Taxes For more details on retirement planning visit: https://www.pensionsweek.com/