Why Can’t You Spend at a 7% Rate in Retirement?

A reader of this recent article asked why he couldn't project a 7% spending rate for his retirement account, given that his investments have been returning north of 12% for several years. The answer is simple: The market doesn't always go up, and it certainly doesn't always go up by 12% per year.

This long into a bull market, it may be hard to remember, but it wasn't that long ago when the market fell by a whopping 24% over the course of a decade. Spending at a rate that may look feasible in a raging bull market is a great way to run out of money well before you run out of retirement when the market doesn't cooperate.

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Source: Fool.com