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The following presentation by New England Capital Financial Advisors, LLC (“NECFA”) is intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from NECFA or any other investment professional of your choosing. Please see additional important disclosure at the end of this penetration. A copy of NECFA’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.newenglandcapital.com.
The 4% Rule Just Got an Upgrade
Hi everyone, it’s Ann Marie here. I wanted to share some interesting news that affects how we think about retirement income. You’ve probably heard of the famous ‘4% rule’—the guideline that says you can safely withdraw about 4% of your retirement portfolio each year without running out of money. The creator Bill Bengen, CFP ® originally developed this rule in the 1990’s and recently updated his thinking this summer and released his new book, “A Richer Retirement: Supercharging the 4% Rule to Spend More an enjoy more.” I thought I’d share some insights from his book.
“Bengen now says new retirees could potentially withdraw between 4.7% and 5.25% safely.” That’s a significant upward shift, especially after decades of sticking with the 4% figure. The reason? He’s factoring in today’s higher interest rates and updated market expectations, which make portfolios a little more resilient. In Bengen’s view, safe means that you can maintain a certain withdrawal rate over a 30-year period no matter how the market performs historically. The math assumes that your portfolio would dwindle to zero at the end in a worst-case scenario.
Each individual’s “safe” withdrawal rate is influenced by multiple factors, particularly market performance and valuations at the start of retirement. Research highlights that a bear market early on poses greater risk than one later in retirement. This is due to sequence of returns risk—the idea that the order of market gains and losses can be just as important as the overall average return. When withdrawals are made during a declining market, losses are compounded and capital is depleted more quickly, reducing the portfolio’s ability to recover even when markets rebound.
While this update tells us you may have a little more room than we once thought it doesn’t mean everyone should automatically increase spending. Your comfort level, goals, other income sources like Social Security, possible pensions, how your account is allocated, and the markets still matter. The real key is building a plan that adapts—to your needs and to changing conditions—rather than sticking to one rigid number. After all there are no guarantees on any “rule.”
So, if you’re thinking about retirement or you’re already in it and wondering how this update might affect you, let’s talk about it. Everyone’s situation is unique, and I want to make sure your income plan matches your lifestyle goals while still keeping you financially secure now and in the future.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by New England Capital Financial Advisors, LLC [“NECFA”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from NECFA. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. NECFA is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the NECFA’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.newenglandcapital.com. Please Note: NECFA does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to NECFA’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a NECFA client, please contact NECFA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.