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June 9th, 2007 at 10:03 am
Here’s a question that bug’s me - everything I read says you should plan on having a retirement nest egg equal that allows a 4% annual drawdown - basically I need savings of 25x my estimated annual requirement. What doesn’t make sense to me is that if I can conservatively earn say 6% and inflation is 3%, my savings will grow at net 3%. If I limit my withdrawls to 4%, I am only taking out roughly 1% of my savings per year. Think the 4% rule assumes that you want to keep your principal stable. Obvioulsy not a good idea to plan on bringing down your savings to zero - but also, not a good idea to live on less just to leave a big inheritance. Any thoughts?