Is 4% an Unsustainable Withdrawal Rate

Historically, 4% was thought to be the withdrawal rate the average portfolio could withstand on a long term basis without eating into capital. Recent research indicates that in today’s lower investment return environment, maybe that’s no longer sustainable. We all think of our average long term portfolio returns as the determinant of the sustainable withdrawal rate but another big factor is the portfolio’s volatility because if you happen to take money out when the portfolio is facing a dip, it may never recover. Hence the need for more stable portfolios when withdrawing.

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