4%: A Sustainable Income Guideline
Written on November 11, 2019

4%: A Sustainable Income Guideline


Designing a sustainable retirement income strategy incorporates many factors.  Two key variables are your withdrawal rate and portfolio allocation blend.

The chart below illustrates the likelihood of meeting income needs over a 25-year retirement under different withdrawal rate and allocation scenarios.  The higher likelihood numbers are better.

Source: Morningstar

Three key takeaways:

    1. A 4% withdrawal rate has a greater chance of being sustainable across different allocations.

    2. You need to have a reasonable allocation to stocks as part of your retirement income strategy.

    3. Going “all in” on stocks is not likely to compensate for a too high withdrawal rate.

- Cris

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