Investopedia

Continue to Site »

Four Percent Rule

Filed Under »
Dictionary Says

Definition of 'Four Percent Rule'

A rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. The four percent rule seeks to provide a steady stream of funds to the retiree, while also keeping an account balance that will allow funds to be withdrawn for a number of years. The 4% rate is considered to be a "safe" rate, with the withdrawals consisting primarily of interest and dividends. The withdraw rate is kept constant, though it can be increased to keep pace with inflation.
Investopedia Says

Investopedia explains 'Four Percent Rule'

The four percent rule helps financial planners and retirees set a portfolio's withdrawal rate. Life expectancy plays and important role in determining if this rate is going to be sustainable, as retirees who live longer will need their portfolios to last a longer period of time and medical costs and other expenses can increase as the retiree ages.

Articles Of Interest

  1.

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.

  2. Strategies For Withdrawing Retirement Income

    You've accumulated the wealth you need to retire, but how will you distribute it? We'll lay out some options.

  3. Will A Systematic Withdrawal Plan Work For You?

    Check out the particulars of an SWP to see if it's the right choice for your retirement.

  4. Retiring On Investment Interest: Can It Be Done?

    Spending investment interest in retirement can be a viable strategy, but it won't work for everyone.

  5. Retirement Planning Basics

    Realizing your post-work goals need not be daunting. We'll tell you everything you need to know to get - and stay - on track.

  6. Planning Your Second Career

    A second career can provide opportunities whether you are worried about outliving your retirement savings, or you want to stay productive and do something meaningful later in life.

  7. How To Start Saving For Retirement

    If you establish these money-saving habits and patiently allow your wealth to build, you will be taking some huge steps forward in making your financial future more secure.

  8. An Introduction To The Keogh Retirement Plan

    Learn more about this popular defined-contribution retirement plan that many business owners, proprietors, and self-employed people can benefit from.

  9. How To Buy Annuities (And When Not To)

    Annuities are complicated products that require some basic homework to be done before requesting quotes. Retirees will want to think about how they envisage their lifestyle and even their potential ...

  10. How To Profit From Risk

    CDs may look safe and attractive but considering most pay a rate that is less than the rate of inflation seniors today risk actually losing money with CDs. We need to be our own money managers ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  2. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  3. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  4. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  5. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.

  6. Lease To Own

    An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time.
Trading Center