How Much Can YOU Safely Spend in Retirement? (4% Rule ➡ 6.3% Rule?)

0:00 How Much Can You Safely Spend in Retirement?
0:38 What is a Safe Withdrawal Rate?
1:43 Two Glaring Problems with the 4% Rule
4:08 The 4% Rule and Social Security
5:45 The 4% Rule and Your Age
6:47 The 4% Rule and a Smaller Portfolio
8:02 The 4% Rule and Spending More Initially
9:43 The 4% Rule and Leaving Money to the Next Generation
11:33 The Real Solution to the 4% Rule

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Always remember, "You Don't Need More Money; You Need a Better Plan"

[pubmeatman]

I optimized my withdrawal rate by not giving a “ financial planner” their cut from my portfolio.

[ronmexico]

Leaving money and opportunity on the table leads to peaceful sleep. Consumption isn't the be all end all use of money

[MN-wgqd]

I think the main thing is to get to a solid number and consider hopping back into part time work and/or cutting expenses if things look grim the first 5 or so years in retirement

[meibing]

Great walk thru of the options and possible outcomes. Of course there is much more info needed for individuals to make their plan “fail safe” - but this shows the importance of a holistic view of your pension funds.

[Estates]

Great video!!! Makes a lot of sense!! Great job digging into this 4% rule

[danharkness]

Thank you. A good thought provoking video.

[roberthuff]

Well done, thank you. Please integrate your adaptive strategy with actuarial data. Not many people live for 30 years after retirement. An interesting exercise is to calculate the required present value (PV) of your portfolio based on anticipated yearly withdrawals and actuarial data

[chrisharris]

Excellent video, your content always sparks so many ideas in my head. I am planning a flexible withdrawal approach to retirement and I really appreciate your videos. Thank you!

[ld]

Another very good video Eric. Thanks for sharing this info with everyone. Larry O. Ca.

[JM-gkkp]

great video! What are your Company fees, % of Portfolio, annualized or other fee bases monthly flat bases on Assets Managed?

[stevejohnson]

Wonderful video. Add to this that it would be very difficult to need for money into your later years in retirement instead of your beginning and its plain to see the 4% rule is really very accurate if you want to leave a lot of money to your children.

[Chilliconcarnage]

For retirement accounts only that dont include SS, annuities, rental income erc., Do these assume total income for couples? E.g., the $2M example could be $1.3M from one spouse and $0.7M from another?

[rootedrotor]

Curios - what about an early retiree? I'm 50 with $2.7 invested and no debt. No house though I rent. If I retire, I'm looking at roughly $2k a month in SS at 62. I'm a flexible person, not married and no kids. I'd really like to spend as much I can early on in my retirement? Do you think 5% would be an acceptable withdrawl rate? Thanks.

[drmitofit]

I am going with 6% of my total TSP balance (near its all time peak) divided by 12 for a fixed monthly installment withdrawal, no yearly inflation adjustment. This should hold up greater than 30 years even with a well below average C fund return on investment. Retirees tend to spend less as they get older so the decreased purchasing power is actually not that bad. In 7 years I will file for SS at full retirement age for a delayed boost in retirement income. Worst case scenario, if there is big crash like 2009 or 2020 I can just turn off the installment spigot for 6 months to a year and wait it out on my ample cash reserves.

[le]

So how do you figure out based on your own personal situation what your percentage withdrawal is? It sounds like it's very customized based on your balance and age of retirement. Did I miss the part of what percentage of inflation they base this on? And what percentage of returns?

[ahwhite]

Great video. Another factor I've been playing with is paying off my mortgage. Between that, and receiving social security, my wife and I could potentially find ourselves with an income stream our 70s which is (inflation-adjusted) higher than what we spend now, even if we zip through our entire savings. I have been needing to try to do all of these calculations myself, and find myself re-looking at them each time I have a frustrating day at work. I suppose I need to find a decent financial advisor.

[jdollar]

SS can be tricky because it's only guaranteed while you're alive. We all will die, and normally one spouse will live considerably longer than the other. That "guaranteed" income will take a hit at some point.
Ive always looked at the 4% rule as a baseline. Its the same as the 25x rule. I dint think anyone really looks at it as the answer to all your retirement questions.
We both retired before 60 with a goal of spending the exact same as our "bring home" pay leading up to retirement. Due to inflation, kids stillin college, and a lot of traveling, we have actually needed more income than planned. Fortunately, that number is still in the 4% area and we are doing all we want.
It's good to be retired.

[kenb]

Another good video, thanks. I would like to see these concepts taken a little bit further. We typically think of retirement and spending as a hard line transition from accumulation to decumulation. But the reality is that for most people it could be softer. While official retirement might happen between age 57-67, there are lots of things happening before that time: kids moving out, mortgage being paid off, income peaking, etc. What would be the impact of possibly moving spending into even the later working years? Maybe buy that Porsche. Maybe rent the downtown penthouse. That is, extend the left side of the smile a bit into the working years.

[dmoon]

Did your examples for smaller portfolios also use the 30-year timeframe, i.e. portfolio is exhausted at or around the 30 year mark, and OASI is the only income that continues after consuming the portfolio for income?

[drmitofit]

I put numbers into a withdrawal calculator and came up with 6.6%. That is because I did not adjust for inflation and assumed 7% return on investment. For married retirees like me in the TSP, you need a new notarized form every time you change the withdrawal amount. If I set it to a fixed amount I only need the one form for the rest of my life. People spend less as they get older (go go years early, slow go years later). My FERS pension and SS will have cost of living adjustments, so I don't really need a COLA for my TSP withdrawal. I am %100 C Fund (S&P 500) that averages 10%+ per year so 7% is a modest assumption.