Retirement Retrospective

The conventional retirement wisdom suggests that you should save no more than four percent in your first year of retirement. That suggestion could change.
Retirement Insight on Your Nest Egg
You should adjust this amount each year to keep up with inflation. However, this rule is being challenged by market forecasters who predict lower returns in the future, which could change the way millions save for retirement and spend later.
A recent report shows that people who are retiring now want to have a high level of confidence in their retirement. A $1 million portfolio would see a retirement account spend $33,000 the first year. After that, the investor’s annual income would rise to $34,320 in year two and $35,690 in year 3, assuming 4% inflation. These figures are regardless of how the market performs.
In the 1990s, the 4% rule became the standard for wealth management. Millions of Americans relied on this figure for their retirement spending decisions over the decades. Investors could hold 50% in stocks and half in bonds, allowing them to have their money last for the vast majority of their 30-year retirements between 1926 and 2020.
This is not as likely, as future returns are expected lower after a prolonged period of above-average gains. For example, researchers looked at future returns over a 30-year span and found that 25% of simulations showed that a portfolio of half-stock and half-bond would run out of money, even if withdrawals were kept at 4%.
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