The 4% Rule (A Starting Point, Not a Guarantee)
A commonly cited starting point suggests withdrawing about 4% of your portfolio in the first year of retirement, then adjusting for inflation each year after — though this guideline has limitations and doesn't account for market sequence risk or individual circumstances.
Sequence of Returns Risk
Poor market performance in the early years of retirement can have an outsized negative effect on how long savings last, even if average returns over the full retirement period are reasonable.
Why Some Retirees Layer in Guaranteed Income
Pairing guaranteed income sources (Social Security, pensions, annuities) for essential expenses with flexible portfolio withdrawals for discretionary spending can reduce the pressure on your portfolio during market downturns.
Key Takeaways
- The 4% rule is a commonly cited starting point, not a guarantee for every situation.
- Sequence of returns risk means early-retirement market performance matters more than averages alone suggest.
- Combining guaranteed and flexible income sources is one way to manage withdrawal risk.
This is general education, not investment or financial advice. Withdrawal strategies should be tailored to your specific portfolio and goals with a financial advisor.
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