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Does the 4% Withdrawal Rule Still Apply?

May 31, 2020

From the U.S. News & World Report website

On its face, the “4% rule” is pretty straightforward: Retirees withdraw 4% of their portfolio value every year and avoid the risk of outliving their money.

The rule is based on academic research of investment returns over several decades and incorporates annualized returns, compounding and dividends. Investors canalso adapt their withdrawals to account for inflation.incorporates annualized returns, compounding and dividends. Investors canalso adapt their withdrawals to account for inflation.

But are there problems with that rule, which was developed in the 1990s. Does it still hold true, even in today’s market, which has undergone several steep downturns in the past 26 years? Does it account for various investing styles or just a “buy and hold” approach?

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