Why new retirees may need to rethink the 4% rule

Published On Dec 17, 2024, 8:15 AM

The article discusses the potential need for retirees to adjust their expectations about the 4% rule, a popular guideline for retirement spending. Many financial experts, including those at Morningstar, suggest that upcoming decreases in expected returns across stocks and bonds may necessitate lowering the withdrawal rate, with a proposed safe rate dropping from 4% to 3.7% starting in 2025. This adjusted rate implies that retirees should reconsider their spending strategies, especially during market downturns, to avoid depleting their savings too rapidly. The article emphasizes the importance of remaining adaptable with spending in response to market conditions, and it suggests that retirees might increase their initial withdrawal amounts if they can be flexible about reducing withdrawals in economically tougher times.