The 4% Rule: A Guide to Sustainable Retirement Spending
The 4% Rule for Retirement Spending
Choosing the right spending strategy can help ensure your nest egg will support you throughout retirement. Many older adults worry about depleting their savings. In fact, a recent Allianz Life retirement study found that more than 60% of Americans worry more about running out of money than death.
The 4% Rule Explained
- The 4% rule is a popular retirement strategy that helps you figure out how much you can withdraw from your savings every year without depleting it down the line.
- Essentially, the rule suggests that you:
- Maintain a balanced portfolio of stocks and bonds
- Withdraw up to 4% of your nest egg during the first year of retirement
- Adjust your withdrawals to account for inflation beginning in year two
By following this rule, your savings could potentially support you for at least 30 years. This is because the diversification of your investments positions you to live off your nest egg without needing to dip into your principal.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.