The 4% Rule Explained
The 4% rule suggests retirees can safely withdraw 4% of savings the first year, then adjust for inflation. It aims to ensure retirees do not deplete funds over 30 years. Recent data shows about a 90% chance of not running out of money over 30 years using the rule. Despite some criticism, it remains a decent guideline for managing retirement savings.
How the 4% Rule Works
The rule states withdraw 4% of retirement savings the first year. Adjust this amount for inflation each following year. This aims to ensure retirees do not deplete funds over 30 years. The rule offers a steady income and preserves retirement savings.
Factors Affecting the Duration of $1 Million in Retirement
How long will $1 million last in retirement? It depends on where you live and cost of living. $1 million can last from 8 to 45 years. A study found how long $1 million would last in 50 US cities. Inflation, retirement income, and lifestyle choices impact the duration of retirement funds.
Key Considerations to Make $1 Million Last
How long $1 million lasts depends on: your desired lifestyle, where you live and cost of living, healthcare costs, longevity and family history, and inflation’s impact. Inflation now is the highest in 40 years. That means retirement savings don’t go as far. Retirees may need to withdraw more just for living expenses. Run information through a retirement calculator to see how much to save. Build an emergency fund with 3-6 months of expenses to avoid withdrawing too much from retirement savings if you have unexpected costs.