Retirement Planning

[disneysteve]

I was using simple math. If your investment grows at 10% and inflation is 4% then you should be able to safely withdraw 4%.

The problem is the market doesn't follow simple math. While a fund may have a long term average annual return of 10%, within that average could be years when the fund is down 3 or 5 or 25% and other years when the fund is up 1 or 6 or 32%. If you consistently draw out 6%/year including in the down years, you will most likely run out of money.

[Petunia 100]

Artwest, I'd not heard of The Bengen Study. So thank YOU for that, I am looking forward to reading it.

So much depends on sequence of returns. Those who are lucky enough to enjoy above average gains in early retirement can probably adjust their rate up to 5% safely. Those who are unlucky enough to have below average returns in early retirement may be forced to adjust down to 3.5% or so or risk running out of money.

If I am unfortunate enough to experience a bear during the first few years of retirement, I think I would try to go back to work.