# Forget the 4% retirement spending rule. How do you feel about 1.9%?



## Paco Dennis (Oct 1, 2022)

"New research uses more realistic assumptions and reaches a far lower estimate of what we ca_n safely spend each year in retirement_​_
Retirees and near-retirees have known for some time that the famed 4% rule needs to be revised downwards. But by how much?

Would you believe 1.9%? That’s the conclusion of new research that replicates the original research that led to the 4%, but with more realistic assumptions about our life expectancies and a more comprehensive historical data set.

The implications are huge and potentially devastating. Under the 4% rule, a $1 million 401(k) would allow you to spend an inflation-adjusted $40,000 each year in retirement with minimal odds of outliving your money. With the new rule, you would be able to spend an inflation-adjusted amount of just $19,000 per year.
And that’s assuming you have a $1 million retirement portfolio. According to the most recent analysis by Vanguard, only 15% of retirement accounts at Vanguard are worth even $250,000. And according to an analysis of Federal Reserve data by the Boston College Center for Retirement Research, only 12% of workers have any retirement account in the first place."_

4 min. read

https://www.marketwatch.com/story/f...ending-rule-would-you-believe-1-9-11664559109


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## Alligatorob (Oct 1, 2022)

Paco Dennis said:


> How do you feel about 1.9%?


Not very, the article makes some good points though.  Thanks for posting


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## ElCastor (Oct 19, 2022)

Paco Dennis said:


> "New research uses more realistic assumptions and reaches a far lower estimate of what we ca_n safely spend each year in retirement_​
> _Retirees and near-retirees have known for some time that the famed 4% rule needs to be revised downwards. But by how much?
> Would you believe 1.9%?_


I am probably missing something, but don’t some of us get a thing called, let me think about it for a moment, uhh, yes that’s it! Social Security?


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## OneEyedDiva (Oct 19, 2022)

A few months ago, I read an article that said the 4% rule was found to be obsolete, even by the person who came up with it. New withdrawal strategies were suggested, but at a 4.5% rate.Then again...we weren't in a full blown bear market yet nor facing down a recession. 
https://www.barrons.com/articles/th...he-says-it-now-could-be-up-to-4-5-51611410402
My withdrawal rate: 0%. Thank God I don't need to make withdrawals, especially during this time. I'd like to read the article you posted but it's late so I'll read it later on.


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## NorthernLight (Oct 19, 2022)

Good to know though. For when you win the lottery!


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## HoneyNut (Oct 19, 2022)

Paco Dennis said:


> With the new rule, you would be able to spend an inflation-adjusted amount of just $19,000 per year.
> And that’s assuming you have a $1 million retirement portfolio.


If I divide a million by 19k, it looks like the money would last over 50 years (I'll assume that is valid, that the stock market will at least keep up with inflation over time).  To what age are they expecting people to live?   Or are they trying to preserve the entire original million to leave to heirs?


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## Teacher Terry (Oct 19, 2022)

Some younger people such as Mr. Money Mustache are retiring in their 30’d and 40’s. They are high earners who are frugal, save a million and then live off the interest.


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## Buckeye (Oct 20, 2022)

I have never felt obligated to leave my son an inheritance.  So I say, let the good times roll....


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## C50 (Oct 20, 2022)

HoneyNut said:


> If I divide a million by 19k, it looks like the money would last over 50 years (I'll assume that is valid, that the stock market will at least keep up with inflation over time).  To what age are they expecting people to live?   Or are they trying to preserve the entire original million to leave to heirs?



That's a thought I have when reading financial comments for retired people.  I think investment institutions spread fear for their own profit.  Their goal is to keep as much money as possible in their accounts to maximize profits, so they convince the public never draw down your accounts or you will end up living in a box under the bridge.  It's all doom and gloom, worry, worry, don't spend a dollar.

Personally I don't care if my investments out pace inflation, I didn't bet my retirement on financial growth but on financial stability.  Do I want to pass on some wealth to my kids? Sure, but I planned so I can enjoy my retirement, not fund theirs, and certainly not to let investors use my money to pad their accounts.   I fully intend to spend down my accounts,  so in your face investment managers!


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## ElCastor (Oct 20, 2022)

C50 said:


> That's a thought I have when reading financial comments for retired people.  I think investment institutions spread fear for their own profit.  Their goal is to keep as much money as possible in their accounts to maximize profits, so they convince the public never draw down your accounts or you will end up living in a box under the bridge.  It's all doom and gloom, worry, worry, don't spend a dollar.


My wife and I retired at a relatively young age, use a money manager, and have NEVER ONCE heard your “doom and gloom, worry worry, living in a box under a bridge“. If you have a manager that engages in such a transparent scheme you might want to find another one.


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## David777 (Oct 20, 2022)

Have for years seen ads on media sites for these retirement financial advisors and one thing they all seem to state is large amounts of money required to live in their opinion a reasonable level of life.  Although they address that to the broad public, what they state supposedly "just to get by" is only true for wealthy that already have high expenses, not average Americans. They usually quote figures of average net worth in order to make readers think they have too little, a manipulative agenda for more customers.  But those numbers are heavily skewed by the ultra wealthy and anyone that owns real estate given recent decades predatory Wall Street manipulated appreciation.

https://www.businessinsider.com/personal-finance/average-american-net-worth

_While the average net worth is upward of $700,000, the median net worth tells a very different story. Calculated this way, the typical American family has a net worth of $121,700. The median, or middle value in a set of numbers, is less sensitive to outliers, so may be a more accurate representation of a typical family. The median shows a very different reality for Americans...

Home ownership status    Average net worth     Median net worth
Owns a home    $1,102,100    $255,000_
*Doesn't own a home    $95,600    $6,300*

So there are far more people that never bought a home that have very little net worth.


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## C50 (Oct 20, 2022)

ElCastor said:


> My wife and I retired at a relatively young age, use a money manager, and have NEVER ONCE heard your “doom and gloom, worry worry, living in a box under a bridge“. If you have a manager that engages in such a transparent scheme you might want to find another one.



Well no, a financial advisor has not said something like that directly to me, though I was told by one I was "foolish" to pay off my mortage.  The gloom and doom comment was addressing comments I read across forum boards where it seems people are afraid to use their money, and many times it seems to be on the advise of their financial advisors to keep investing or they'll run out of money.


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## ElCastor (Oct 20, 2022)

C50 said:


> Well no, a financial advisor has not said something like that directly to me, though I was told by one I was "foolish" to pay off my mortage.  The gloom and doom comment was addressing comments I read across forum boards where it seems people are afraid to use their money, and many times it seems to be on the advise of their financial advisors to keep investing or they'll run out of money.


I have some experience in the finance business, although not this end of it. Those financial advisers have a moral, ethical, and perhaps even legal responsibility to the customers they advise. End of life care can be extremely costly. If they see them headed down the wrong path they are duty bound to point it out, so I wouldn’t assume the worst, but anyone who believes they are being taken advantage of should either ignore the advice, or find another advisor.


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## CarolfromTX (Oct 21, 2022)

Inflation is taking a huge bite out of everything. My teacher pension‘s buying power is diminished by at least ten percent. Never mind soaring energy and grocery prices. Depressing.


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## OneEyedDiva (Oct 21, 2022)

Teacher Terry said:


> Some younger people such as Mr. Money Mustache are retiring in their 30’d and 40’s. They are high earners who are frugal, save a million and then live off the interest.


I've read about Mr. Money Mustache; he's part of the F.I.R.E. movement.  I hope people who retire that young have something engaging that they love to do otherwise they'll be bored silly. More than likely they've saved more than a million and/or live off of investment returns, not interest which has been a pittance over the past several years. Mr. Money Mustache invested in a couple of rental properties as well.


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## leastlongprime (Oct 31, 2022)

Some people believe in the Bogle philosophy. 
I don't and have diversified our retirement assets into longevity (GLWB) annuities, rental, pension, SS.
I don't count the discretionary as part of our retirement Income because it is not Income but highly speculative stocks. 
YMMV


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## Teacher Terry (Oct 31, 2022)

OneEyedDiva said:


> I've read about Mr. Money Mustache; he's part of the F.I.R.E. movement.  I hope people who retire that young have something engaging that they love to do otherwise they'll be bored silly. More than likely they've saved more than a million and/or live off of investment returns, not interest which has been a pittance over the past several years. Mr. Money Mustache invested in a couple of rental properties as well.


Yes they invest in the stock market usually mutual funds and live off of returns. Sorry I misspoke. Mr MM actually retired on 650k but he has been retired a long time so I imagine his money has increased a lot. Pete also has a office building but I can’t remember if he rents out some of the space or if it’s for the community. His blog has made a lot of money but due to his divorce a few years ago they had to split assets. I wondered if his frugal ways contributed to it.


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## leastlongprime (Oct 31, 2022)

leastlongprime said:


> Some people believe in the Bogle philosophy.
> I don't and have diversified our retirement assets into longevity (GLWB) annuities, rental, pension, SS.
> I don't count the discretionary as part of our retirement Income because it is not Income but highly speculative stocks.
> YMMV


Actually I don't fully subscribe to either Bogle's philosophy or the balanced portfolio theory. Money and Life is just too variable.


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## leastlongprime (Thursday at 12:56 PM)

Bump


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