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4% Rule | Sustainable Retirement Income?

Most people think that the 4% rule is the best way to make sure they have a comfortable retirement, but what they don’t know is that there are a lot of pitfalls that can come with it.

Today, we’re going to talk to you about something that is really important for your retirement. In this video below, Chris Merchant, CFP® is going to break down exactly what those pitfalls are so you can build a strategy to avoid them. 

4% Rule | Sustainable Retirement Income?

Let’s talk about the pitfalls of a retirement income strategy called the 4% rule. Although you might hear it called the 3% rule, the 5% rule, or even the 6% rule.

This is by far the most popular option we hear pre-retirees considering because so many generalist financial advisors prescribe it.

The goal here is that when you retire, you keep your money invested, so it can continue to grow. You then take out a distribution each year called a sustainable withdrawal. And that’s what you use for your retirement income.

This method often looks great on paper because, during good periods in the stock market, you could take a sustainable withdrawal and even grow your savings.

But if you experience poor investment returns early in your retirement, you’re likely to run into trouble.

People following this method that start their retirement during a negative year in the stock market are likely to have substantially different results than those that start their retirement during a positive year. We call this the Luck Factor™. Luck retiring into a good market or bad luck retiring into a downturn.

You and I both know that the stock market’s returns can’t be predicted in any given year. And I wouldn’t put my entire life savings up for the luck of the draw.

And that’s the downfall of the 4% Rule. The stakes of your retirement are just too high to rely on luck.

In retirement, you shouldn’t invest your money the same as you did while you were working and saving. There is a better way!

If you want to learn more about your options and the Luck Factor™, enroll in our free Retirement Basecamp™ online course today. 

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By: Chris Merchant, CFP® 

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