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What Is the 4% Rule and Is It Still a Good Marker for Your Retirement Plans?

The 4% rule is a widely recognized guideline in retirement planning that suggests withdrawing 4% of your retirement savings annually to ensure a sustainable income throughout your retirement years. This rule emerged from a study known as the Trinity Study, which analyzed historical market data to determine a safe withdrawal rate that would allow retirees to maintain their financial independence without depleting their savings prematurely. We can discuss how the rise in inflation has changed the narrative and why people are looking for some additional solutions. 

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The 4% Rule

The rationale behind the 4% rule is to strike a balance between enjoying a comfortable retirement and preserving enough capital to sustain one's lifestyle over an extended period. The assumption is that a 4% annual withdrawal, adjusted for inflation, should provide a high probability of not running out of money over a 30-year retirement horizon. Most people today are rethinking this concept. Unless one has strategically positioned assets to allow for long term care, tax-free income, liquidity, security, minimization of risks, many are looking at some challenges between inflation and high interest rates keeping them from their retirement dreams.

Let’s dig into economic influences. The applicability of the 4% rule as touched on already is subject to various factors, and economic conditions play a crucial role. One of the key considerations is inflation. Inflation erodes the purchasing power of money over time, meaning that the same amount of money will buy fewer goods and services in the future. If inflation is higher than anticipated, the 4% rule might not be sufficient to cover the rising cost of living. Afterall, people/families are having a difficult time affording food and essentials and are borrowing on credit.

While inflation has gradually come down since January 2022, inflation rates are still a significant concern in various economies. If inflation continues to rise, retirees may need to reevaluate the 4% rule and consider adjusting their withdrawal rates to ensure that their retirement savings can withstand the impact of inflation.

It's essential for retirees to regularly reassess their financial plans, taking into account factors such as inflation, market conditions, and their individual circumstances. Consulting with a financial advisor can provide personalized guidance based on current economic conditions and help individuals make informed decisions about their retirement withdrawals.

If you do not have peace of mind, take advantage of having a complimentary consultation with a professional who can answer your questions and provide you with a roadmap to attaining your goals. Call us at 775-325-4649 or email us at




By: Valerie Clark, Retirement Specialist and Financial Literacy Instructor

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