How to cheat the 4% withdrawal rule?

14 December, 2013

According to the 4% withdraw rule, the retiree can withdraw 4% of money from his nest in the first year of retirement and the amount will be adjusted for inflation, every year. It is studied that people spend a lot less money in the later days of retirement than the first few years.

Problem with the rule

4% of withdrawal from one million dollars would provide 40 thousand dollars as income per year. However, if we could increase the rate to 4.5% or 5% every year, then the extra income will be very high.

How to cheat it?

a)      The rule works with the assumption of thirty years of retirement (65-95). Reducing the retirement years by five years can make sure that the retiree would not run out of money even if he takes 5%, out of the nest.

b)      Though the retirement is considered for thirty year, the life expectancy of an American after 65 is about 17-20 years. Plan your spending with this life expectancy in mind.

c)      Instead of working overtime and earning a small extra amount, take up a part time job after retirement which would give a small stable income and will also clear the mood out of retirement blues, helping retirees to stay physically and mentally healthy.


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