Skip to main content

Opinion: Retirees Need Alternatives to the 4% Rule

David Lau
May 13, 2022

For nearly three decades, many financial advisors have relied upon a total returns strategy to generate retirement income for their clients. According to this conventional wisdom, if retirees stay 50% to 75% invested in equities and withdraw 4% annually to fund spending, their nest eggs will be sufficient to get them safely through a 30-year retirement, regardless of market conditions. 

This 4% rule, created by financial advisor and researcher Bill Bengen in his famous 1994 study, is rational, historically proven advice. But here’s the thing: In today’s inflationary climate it’s super difficult to follow once you’re retired. How do I know that? Because the now-retired guy who invented it isn’t sticking to it. In a recent Wall Street Journal article Bengen, citing unprecedented economic conditions and high market valuations, recommended that retirees rein in their spending and lower their 4% drawdown. (A November 2021 Morningstar report endorsed a 3.3% withdrawal rate.)

DPL


©2022 DPL Financial Partners, LLC. All rights reserved.

DPL Financial Partners does business in the state of California as DPL Insurance Solutions
under California License #0M42434.

Securities offered through The Leaders Group, Inc. Member FINRA / SIPC
26 W. Dry Creek Circle, Suite 800, Littleton, CO 80120 • 303-797-9080
DPL Financial Partners is not affiliated with The Leaders Group, Inc.

Check the background of this firm on FINRA’s BrokerCheck.

FOR REGISTERED INVESTMENT ADVISOR USE ONLY. NOT TO BE USED FOR CONSUMER SOLICITATION PURPOSES.