"They" claim needing 2 million to retire.âč
4% withdraw would be $80k! Plus SS, disability, etc, etc.
Maybe that works for the rich, but I don't make that now and cover about ~$40k a year between retirement, savings and mortgage.
And if it's earning 9%, then the money never reduces... so you die with over 2 million?
I intend to die with near 0.
You've not been through a down market? Where 20%, or more, was lost year over year? Where an index lost over half its value (I'm looking at you, NASDAQ) in a month?
"They" have been through that.
The 4% rule is based on a balanced portfolio, accounts for inflation, and accounts for market downturns. "They" have run the analysis of getting money to last for 35 years.
Nothing pays 9% with a guarantee, and looking at historic returns on stock indices at about 9%, you are looking at an average, and your plan must account for market downturns, because they will happen.
"The money never reduces"?? Where did you get such a notion? It can, and most certainly, will "reduce" in a market downturn.
So, let's take a hypothetical scenario, using your example and numbers. You need $40K, and you plan a portfolio return of 9%, so, your plan, since it "never reduces" is to amass $445,000 and take out 9% per year.
But what if year one looks like 2008 - the financial crisis, and the market lost 36%.
Your portfolio drops to $284,000. You take out your $40K.
You're now looking at a balance of $244,000. So, your 9% is now $22,000. With no guarantee that the market will return 9% next year, either.
Welcome to the poor house, you are in a downward spiral from which you can never recover.