Why the 4% Rule Still Stands
By Ron Grensteiner, President of American Equity Investment Life Insurance Company
There’s been a recent spate of news coverage from sources such as NBC, the Wall Street Journal, and Fox Business debating the merits of what is known as the 4% rule. Essentially, this rule of thumb states that a retiree can usually withdraw about 4% of the value of his or her portfolio each year without prematurely depleting the principal of the portfolio. In light of stock market volatility, all time low interest rates, and retirees living longer, many financial experts are saying that you should reduce that 4% to 3% and put off taking social security. All that being said, there are ways to make the 4% (or better) work to guarantee income throughout your retirement:
- These products often have lifetime income benefit riders that can offer a 5% or more withdrawal factor guaranteed for your lifetime.
- You’ll know exactly what amount you will get paid on an annual basis for the rest of your life.
- There’s no worry about the stock market crashing, interest rates declining, etc. You can sleep at night knowing that your money is safe and you will not run out, regardless of what percent you choose to take out each year.
So instead of worrying about running out of money in your retirement, you can spend your hard-earned time on more important things like seeing your family and loved ones, traveling, relaxing, and managing your health.
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