The goal of any retirement income or withdrawal strategy is to live a good standard of living without running out of money but also without leaving behind too much and thus living a more meagre life than necessary.
The 4% withdrawal or drawdown rule is probably the most common retirement income withdrawal strategy in use today and is an easy one to understand. Because of this, I am starting my series on retirement income withdrawal strategies here. This rule of thumb was created by William Bengen, a California-based financial planner in 1994. It is based on a study1 of historical returns, and looks at what rate one can safely withdraw without running out of money before dying. Continue reading The 4% Withdrawal Rule