Retire and only pull 4% from your acct?

C

ComplexHiAv8r

Well-Known Member
Why do they say only pull 4% a year for retirement out if your account ? At that rate I'll make my kids millionaires and I'll have a sucky retirement.

I'm hearing multiple places say this. I think it is to cover any major loss in the market but also to keep my money!

Thoughts?
 
ComplexHiAv8r said:
Why do they say only pull 4% a year for retirement out if your account ? At that rate I'll make my kids millionaires and I'll have a sucky retirement.

I'm hearing multiple places say this. I think it is to cover any major loss in the market but also to keep my money!

Thoughts?
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I haven't heard that.

Don't leave your kids squat, bro! :) They'll work harder and you don't want them sitting around doing the whole "Undeclared Major, Amma Barista!" waiting for your rich ass to die.

"Daddy and Derg are down in Cabo drinking your inheritance, son" :)
 
Derg said:
"Daddy and Derg are down in Cabo drinking your inheritance, son" :)
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When do we leave? I'm about to take the ball and go home. Know one wants to play with me anyways. Think I got the cheese touch.....
 
ComplexHiAv8r said:
Why do they say only pull 4% a year for retirement out if your account ? At that rate I'll make my kids millionaires and I'll have a sucky retirement.
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I hope to die a very rich man, giving a lot of money to charity. But don't give any money to those brat kids. Make them work for it. :)

I'm hearing multiple places say this. I think it is to cover any major loss in the market but also to keep my money!

Thoughts?
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It's to give you a decent cushion and to ensure that if any major expenses come up that you'll be able to cover them. Imagine having to go into an assisted living community at age 80 and living for another 20 years. Price that. You'll be amazed how expensive it is. And you sure as hell don't want to be in one of the cheap places.
 
The reason they say 4% is twofold. First, if your retirement gains no interest whatsoever, it'll last you 20 years. If you retire at 65, that'll give you consistent income until you are 85. Most people (these days) will die somewhere within that range, ensuring that you have income throughout your entire retired life.

Second, the hope is that you can gain interest on your retirement money. If can get even a modest 4%, your retirement will last indefinitely, though your purchasing power will decrease due to inflation. If you can gain 4%+ whatever the inflation rate is (say, 2%, so a 6% return), your purchasing power will remain constant as well. Obviously, if you can beat that, the more the merrier.
 
4% comes from simulations of past returns which determine a 90%+ chance of not outliving your money . If you fear outliving your money then 3% is probably what you need. If you want to maximize your lifestyle and dont mind going broke early if you retire at the wrong moment in history then certainly withdraw higher than 4%. Good advice is to delay social security to maximize benefits. Next is be adaptive and flexible with your withdrawals and lifestyle.
 
ComplexHiAv8r said:
Why do they say only pull 4% a year for retirement out if your account ? At that rate I'll make my kids millionaires and I'll have a sucky retirement.

I'm hearing multiple places say this. I think it is to cover any major loss in the market but also to keep my money!

Thoughts?
Click to expand...

the reasoning is that most people won't have enough when they retire, but will be getting a better than 4% return when they retire on their nest egg. Probably assumes balances grow at first, before inflation offsets that and spending goes up.

The better solution is lower overhead in retirement. Go to a third world country and retire there. Preferably one with socialized medicine.
 
drunkenbeagle said:
the reasoning is that most people won't have enough when they retire, but will be getting a better than 4% return when they retire on their nest egg. Probably assumes balances grow at first, before inflation offsets that and spending goes up.

The better solution is lower overhead in retirement. Go to a third world country and retire there. Preferably one with socialized medicine.
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Like Mississippi?

Medical is the biggest problem to retiring before 65. Budgeting $12000 just for the policy is a major hit to a retirement fund.

I have a problem when my financial guy informed me at the at the last meeting he doesn't think he will be able to retire and will get his kids into the business so he won't retire (and how Edward Jones does retirement).....

If I could just make money with the PC-12 8( I'm not CSEL, only CMEL...
 
ComplexHiAv8r said:
Like Mississippi?

Medical is the biggest problem to retiring before 65. Budgeting $12000 just for the policy is a major hit to a retirement fund.

I have a problem when my financial guy informed me at the at the last meeting he doesn't think he will be able to retire and will get his kids into the business so he won't retire (and how Edward Jones does retirement).....
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huh? I figure I can afford my dream of retiring on a sailboat in the Carribean now...
 
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