Page 117 - Ready Set Retire

Ready. Set. Retire!

when the market doesn’t cooperate, rather than seeking an
alternative to the market.

Here’s an idea. What if we just assumed at age 65, we would
live to age 90? Twenty-five years. Now assume you took your
money out of the market and put it into an account that would
lose no money, say a CD. It’s not making any money, but it
isn’t losing it, either. Now, take the 500,000 from the TRP
example, and divide it by 25:

500,000 ÷ 25 = $20,000

There’s your 4%! Lasting 25 years, 100% of the time, without
a return. Also without an inflation adjustment.

But that isn’t the whole picture with regard to the 4% Rule. It
states you will withdraw 4% year one, and bump it by 3% a
year for inflation (to clarify, it’s 4% year one, then 4.12 year
two, and so on. It also assumes a 30-year retirement.

Therefore,

$500,000 ÷ 30 = $16,666

That comes out to 3.33% payout, for 30 years with no inflation.
Add 3% inflation on that every year, and your money will last
21 years. However, adding just 1% per year rate of return
extends that by 2 ½ years to 23 ½, and adding a 2% rate of
return adds 4 ½ to year 26. Adding 3% rate of return gets it

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