I am not an expert. My opinion is that it is correct but incomplete. You need to plan for your personal situation. This is where professional help can be helpful. I expected to draw from Social Security as soon as eligible and to use the 4% rule. We were advised not to, all for reasons specific to our situation. All of the advice / reasons resonate, and I never would have gone that way on my own. The end result projects to be a portfolio that allows us to retire earlier than expected and for our kids to be recipients of a much much larger inheritance than we would have ever imagined. You can see why I am biased in favor of doing that free Monte Carlo / financial advisor service with your bank.This is what I want to know from Retirees, Is this method correct?
In direct contrast with the 4% rule is Financial Planner Ty Bernicke who published his white paper in the Journal of Financial Planning suggesting that retirement spending actually decreases on average by about 15% every 5 years.
And that by the time a retiree reaches their late 70s, their spending drops to less than half of what they were spending in their late 50s.
This approach, Bernicke says, requires one to adjust their income upward every year throughout retirement to account for a rise in inflation. Furthermore, this method requires a retiree to save more money than they’ll actually really need, while spending less, and potentially retiring later.
To counter this, Bernicke’s approach believes that the 4% rule is too rigid and that since retirees wind up spending much less in later years as they age, they could safely afford to retire earlier or spend more in the earlier years of retirement. This static rule dictates that the retiree does not change spending, up or down, no matter how the market performs. As a result, the retiree may run out of money.
