Tweaking the 4% Rule

On April 25 Morningstar published an article "Retirees: Here’s How to Tweak the 4% Rule to Protect Your Nest Egg".  It includes a link to their Report "State of Retirement Income 2024".  The report requires an email address.

With recent stock gyrations I thought that their most recent look at withdrawals and retirement accounts might be helpful.

Here are a few points made in the article:

"Morningstar researchers have investigated and identified their latest starting safe withdrawal rate. Here’s a hint: it’s slightly lower than the previous year. "
About saving for retirement, "it’s pretty straightforward as long as you start early and you’re consistent about it. But when it comes to taking your retirement portfolio and figuring out how to turn that into a paycheck for yourself, that gets much more complicated."
There’s sort of a balance. You want to make sure that you’re spending enough so that you can enjoy your retirement and enjoy hobbies and travel, that kind of thing, but not spend too aggressively so that you might have to cut back later in life. "A lot of people actually end up underspending."
Morningstar states that their approach is different. "We decided that instead of looking at past data, we would do something more forward-looking, using market estimates for possible future returns."
Looking at the past 15 years  Morningstar says the market returns were "actually the best 15-year period for stocks that we’ve seen going back to 1970."
Morningstar has reduced their return assumptions for stocks and bonds.
Morningstar's analysis looks at 900 outcomes using a base case of 3.7% and "various flexible or dynamic withdrawal strategies."  These alternatives "can often lift the starting withdrawal rate."

Here's a link to the article:

https://www.morningstar.com/retirement/retirees-heres-how-tweak-4-rule-protect-your-nest-egg

 

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