The 4% rule assumes that you withdraw the same amount of money from your portfolio every year, and then adjust for inflation.
The formula is relatively simply: you add up all your investments and withdraw 4% of that for your first year of retirement. In the following years, you adjust the dollar amount for withdrawal to account for inflation. By following this formula, people usually have a high chance of not outliving their money within a 30-year period.
For years, many used the 4% rule to ensure that they wouldn’t run out of money, but this may not be the best choice anymore. The 4% rule can leave you missing out on opportunities and experiences that you wanted to enjoy during retirement and doesn’t account for the years that you may spend more or less. Let’s examine the 4% rule and alternatives that you can use.
