The 4% Rule
What is the 4% rule regarding withdrawals and why is it important to understand?
What is the 4% rule regarding withdrawals and why is it important to understand?
Withdrawing less than 4% of your portfolio of liquid assets (money in the bank, mutual funds, individual securities, annuities, cash value life insurance, etc.) to pay the bills in retirement will probably allow your portfolio to last beyond 30 years before running on empty. The word probably is used because there are caveats.
Allocating 50% or more in stocks is a wise move to keep the portfolio growing over that time period beyond the inflation rate. Keeping the portfolio cost down to around .10% is wise (an all index portfolio at Vanguard will do the job). These two steps are critical to making the 4% rule work for most people in most situations. More can be learned on this subject by reading Graduation! Awake to the possibilities!
What if my only option is Vanguard ETFs, which is close to .40%? Will I still be able to make the 4% rule work?