is based on a worst case scenario of portfolio performance
5 not 4 may be a more realistic numberthe 4 rule and economic crisesaccording to michael kitces a financial planner the 4 rule was developed to take the worst economic situations into account such as 1929 and has held up well for those who retired during the two most recent financial crises as kitces points out this is of course not a reason to go beyond it safety is a key element for retirees so even if following the 4 rule may leave those who retire in calmer economic times with a huge amount of money left over kitces notes in general a 4 withdrawal rate is really quite modest relative to the long term historical average return of almost 8 on a balanced 60 40 portfolio 3meantime some experts pointing to the recent low interest rates on bonds and savings suggest that 3 might be a safer withdrawal rate the best strategy is to review your situation with a financial planner starting with how much you have saved what your current investments are and when you plan to retire read about investopedia s 10 rules of investing by picking up a copy of our special issue print edition 