The 4 Percent Rule has arguably become one of the best known and somewhat controversial strategies in retirement planning when it comes to safe withdrawal rates. Yet, despite how often we refer to it on this blog, it occurred to me that I’ve never actually written an article that talks about it comprehensively. While doing the research for my ebook “How Much Money Do I Really Need to Retire & Achieve Financial Independence?”, I got the opportunity to dive pretty deep into the publications that made the 4 Percent Rule famous and the studies where it originated. That ended up becoming a very interesting task because it helped me to understand this topic at a much deeper level. As it turns out, there is actually a lot of … [Read more...] about The 4 Percent Rule – Everything You’ve Ever Wanted to Know
Retirement
Right or Wrong, Keep Planning Your Retirement
One of the most frustrating parts of retirement planning is the fact that no matter how ironclad yours might be, there will always be someone who will tell you that its wrong. And unfortunately they’re right. They’re right in the sense that no one can predict what is going to happen in the future. Assumptions are the gears that make our retirement machines work. Choose unwisely and your plan will deviate from reality very quickly. Nearly every assumption we use in retirement planning is up for debate. The average annualized market return we use to forecast how much our portfolios will grow is really nothing more than just an “average”. You see this all the time that someone will make an Excel spreadsheet where their nest egg … [Read more...] about Right or Wrong, Keep Planning Your Retirement
Our Plan for How to Achieve Financial Freedom – January 2017
Welcome to the annual edition of our plan for how to achieve financial independence and retire early (aka F.I.R.E.)! Every year at least one time, I like to take everything I’ve learned about aspiring to a level of financial freedom and meld it all together into one big plan - OUR plan - my “money design”! It's possibly one of the most brilliant things I'll ever create - a blueprint for living off of passive income for literally the rest of our lives! Why do I do this? For both my sake and yours. I’m a big believer that knowledge is only as valuable as your ability to apply it to something useful. For me, I like the challenge of crunching the numbers and seeing if everything we're doing (or will be doing) is truly going to work out or … [Read more...] about Our Plan for How to Achieve Financial Freedom – January 2017
Does a “Percentage of Remaining Portfolio” Retirement Withdrawal Strategy Work?
Even after writing my last ebook "How Much Money Do I Really Need to Retire & Achieve Financial Independence?" which talks a lot about retirement withdrawal strategies, I still like to actively comb through the Internet and see what sorts of other ideas are out there. One of the least talked techniques that I've come across (but I see them mentioned in forums like the EarlyRetirement.org) is one where you simply take out a "Percentage of the Remaining Portfolio". Note that this is drastically different from the traditional 4 Percent Rule that most people follow. With the 4 Percent Rule, you take out 4 percent of the "initial" portfolio balance, not the remaining portfolio balance each year. What's got me thinking about this … [Read more...] about Does a “Percentage of Remaining Portfolio” Retirement Withdrawal Strategy Work?
Could This Be a New Safe Way to Use 4 Percent Rule?
Who says you can’t have your cake and eat it too! If you’d like to use the 4 percent rule as your safe withdrawal rate but are terrified that it might leave you with nothing a few decades down the road, then I may have a great solution to offer you! As I’ve been doing more and more research for my latest ebook (which will be all about optimizing “how much” you need to save for retirement), I’ve been getting really excited about some of the cool stuff I’m finding out. For example, there was the post I did a little while back about how the updated Trinity Study showed that you could use a 7 percent safe withdrawal rate with a 91% chance of success if you don’t adjust your withdrawals for inflation. The 1994 uber-classic 4 percent rule … [Read more...] about Could This Be a New Safe Way to Use 4 Percent Rule?
Last Week Tonight’s John Oliver on Retirement Plans – Hilarious!
It's not very often that I find shows on TV that appeal to my financial nerdiness; let alone comedies. So you can imagine my excitement when I saw HBO's Last Week Tonight with John Oliver: Retirement Plans special. This one HITS THE JACKPOT! It's absolutely hilarious! I've never heard anyone talk about retirement plans quite like this before. It's everything the personal finance community blogs about, but a whole lot funnier! Don't worry if you don't have HBO. You can watch the entire thing on YouTube below. In case you've never heard of it, Last Week Tonight is kind of like the Daily Show on Comedy Central where they take real topics and then blast them. But because its on HBO, they can say (i.e. swear) and do a whole lot … [Read more...] about Last Week Tonight’s John Oliver on Retirement Plans – Hilarious!
Is a Safe Withdrawal Rate of 7.0 Percent Acceptable? The Trinity Study Thought So!
Do you think a safe withdrawal rate of 7.0 percent is reasonable for retirement planning? Unanimously, I can already hear the entire personal finance community scream “NO! Absolutely not!” But what’s interesting is that three of the most-often quoted people in retirement planning seemed to think so: Cooley, Hubbard, and Walz. Just in case you’re not familiar with the names of those personal finance rock stars, they are the three authors who penned the historically important, ultra-popular “Trinity Study”. Yes, the same Trinity Study that validated Bill Bengen’s 4 percent rule and made it one of the most wildly popular tools in retirement planning to date! So then, if the authors validated the 4 percent rule, what is this … [Read more...] about Is a Safe Withdrawal Rate of 7.0 Percent Acceptable? The Trinity Study Thought So!
How the Roth IRA Early Withdrawal Rules Can Help You Retire Early
If you’re an early retirement seeker like me, then here's some good news: The Roth IRA early withdrawal rules make it really easy to get your money out before age 59-1/2 without penalty! Yes, classically a Roth IRA is supposed to be used to provide savers with the opportunity to enjoy tax-free retirement income later on in life. Who doesn’t want to NOT have to pay taxes during retirement? But if you understand the in's and out's of the rules, they can also be used to provide retirement income in thus difficult years between an early retirement and age 59-1/2. It’s a very simple and easy-to-execute strategy. But you still have to be careful! There are some important rules to keep in mind. Otherwise, you might still get … [Read more...] about How the Roth IRA Early Withdrawal Rules Can Help You Retire Early