For the last 20 years there has been a steadily consistent rule of thumb by America’s financial planners when it comes to retirement — the 4% rule.
And what exactly is the 4% rule?
In short, it’s a guideline that helps retirees determine how much money they should take from their nest egg each year. The goal is to help make sure the money lasts.
In other words, if you adhere to the rule and have a nest egg of $500,000, you should limit your withdrawals for living expenses to 4%, or $20,000 a year.
So, the big question is, after 20 years, is the rule still relevant? Most planners interviewed say yes — but only as a rule of thumb, and certainly not for everyone.
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