The 4% rule in retirement planning

The 4 percent rule is a frequently cited approach for how to spend from a portfolio in retirement. In this episode, senior wealth advisor Sharon Calhoun joins Jason to discuss the rule's relevance today.

Some investors use the 4% rule to plan out a yearly withdrawal amount from a portfolio. At Vector, we believe the rule is outdated for most investors. Sharon talks through the research and models to help us better understand the 4% rule's assumptions.

Three takeaways from this discussion are:

1. The model is based on a worst-case-scenario that occurred if someone retired in October 1968
2. The model assumes a static portfolio of two asset classes; U.S. stocks and bonds
3. Sustainable withdrawal rates vary based on client situations

Rules of thumb, like the 4% rule, are a guide but can fail to account for life events and modern portfolio allocation strategies. In contrast, Vector uses a customized bucket-based approach to retirement income planning and investing.

V21217818