Why The 4% Rule Is Not The Answer

    The internet makes it easy to find a wealth of information on everything from retirement planning to making the best investments. However, not all information is of the same quality or written by people who really understand the concept they are attempting to explain.

    A common myth that Registered Financial Consultant Matthew Dixon hears from people in Seneca, SC, planning to retire is that they are going to follow the 4% rule and they will have enough money for retirement. While in theory, the 4% rule has some validity, there are many different factors to consider that can upset this general rule.

    The Basics of the 4% Rule

    The 4% rule recommends that retirees in Seneca, SC, or across the country can withdraw up to 4% of their retirement the first year of retirement and continue to do so with adjustments for cost of living and have enough financial resources for thirty years.

    For this rule to be accurate, it is important to consider your portfolio. The 4% is developed on a combination of 60% of the portfolio in stocks and about 40% of the portfolio held in bonds. The second factor is that the individual or couple must not have a significant change in spending during their retirement. In reality, most people will have changes in their expenses as they age, including significant increases in medical expenses for many families.

    If you are using the 4% rule for your retirement planning, talk to Matthew Dixon and find out if this is an accurate guideline given your specific situation. It is better to find out before you get into retirement so you can make the right choices to increase your savings or modify your portfolio.

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