Forget the 4% Rule. Here's What You Should Really Be Looking at During Retirement.
The 4% rule was developed in the 1990s by financial advisor William Bengen. According to Bengen, people could withdraw 4% of their retirement savings in their first year and then adjust annual withdrawals based on inflation without worrying about running out of money for 30 years.
As an example, let's imagine you have $1 million in retirement savings. In your first year of retirement, you would withdraw $40,000. If inflation went up by 2% in your second year of retirement, you'd withdraw $40,800. If inflation was 3% in your third year of retirement, you'd withdraw $42,024.
The 4% rule has been a rule of thumb used for decades, but times have changed, and it might not be as applicable as it was in previous years. Factors like fluctuating market conditions, lifestyle changes, and longer life expectancy call into question whether retirees should follow the 4% rule guidelines.
Source Fool.com
