How much you can afford to spend in retirement? It’s a question the majority of us inevitably face, yet it’s an answer that can prove elusive. This is where the 4% Rule can help. The 4% Rule is a general rule of thumb for how much you should be able to spend in retirement.
According to the rule, you should be able to spend about 4% of your starting nest egg value each year. So if you begin retirement with a portfolio of $1 million, then that should support roughly $40,000 in annual spending. Keep in mind, each situation will vary by investor, so consult with your financial advisor to see if this makes sense for you.
Watch our video to learn about how the 4% Rule fits in to your long-term financial plan.
To learn more about the 4% Rule and 3 steps to take to manage your money, download the free Personal Capital’s Guide to a Better Financial Life.
To learn more about the 4% Rule and 3 steps to take to manage your money, download the free Personal Capital’s Guide to a Better Financial Life.
Disclosure: Free tools, such as the ones offered through Personal Capital, can give insight into your whole financial picture, which helps you understand what fees you’re paying, as well as build a long-term financial plan. And just as importantly, Personal Capital acts as a fiduciary, so our advisors are legally obligated to always act in your best interest. This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
