What is the 4% Rule and when should you use it?


Brian Decker, Owner and Founder of Decker Retirement Planning joined Janeen on ABC4 Utah to talk about the 4% Rule and when we should and should not be using it.

The question on everyone’s mind is how can retired viewers gain peace of mind? Brian suggests retired viewers make sure they do NOT use the 4% Rule. Banks and Brokers use the 4% Rule to determine how much money to distribute in retirement. 

Brian explains it like this: Stocks have averaged about 8.5% in the last 100 years and Bonds have averaged about 4.5% in the last 40 years, so let’s be conservative and just draw 4% from your assets each year and you should be fine.

This comes down to two major problems: 

  • First, mathematically, if you draw income from a fluctuating account, you compromise gains as markets rise and accentuate losses as markets drop and you will eventually destroy your retirement. 
  • The second problem is that when we eventually do have that 40%+ market drop that takes about 15 years to get back to even, which occur, on average, every 7-8 years, then you will dramatically hurt your retirement if you draw income from an account that just took a 40%+ drop. The 4% Rule only works if you have a forever Bull Market, which is unlikely. We recommend clients draw income from principal guaranteed accounts to avoid this problem.

Brian and Decker Retirement Planning will help you plan for your retirement future, give them a call at Ph# (855) 425-4566 or visit their website.

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