Five factors that could derail the 4% rule in retirement
The 4% rule, created in 1994 by financial adviser Bill Bengen, suggests spending 4% of retirement savings in the first year and keeping that amount adjusted for inflation. A USA Today article lists five factors that could derail it: advisory and fund fees, which can add up to 2% a year; bear markets, since the rule is based on U.S. market performance between 1926 and 1976; early retirement and longer lifespans; cognitive decline, which makes managing money harder and raises the risk of scams; and long-term care costs.
In 45 seconds
- The 4% rule, by Bill Bengen (1994), calls for spending 4% of savings in the first year and then the same amount adjusted for inflation
- Advisory and active fund fees can add up to 2% a year and reduce returns
- The rule is based on U.S. markets between 1926 and 1976; Vanguard projects annual U.S. stock returns of 4.9% to 6.9% over 30 years
Read the full story at USA Today
IASummary generated by artificial intelligence from a story by USA Today. It may contain errors: the original source prevails.
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