A popular strategy for withdrawing from your retirement nest egg, the 4% rule, was developed in 1994 by William Bengen. This rule went under the assumption that if retirees only withdrew 4% from their retirement accounts, adjusted for inflation, their nest egg would last at least 30 years. This rule also assumes that the investment mix is one of 60% equities and 40% bonds, which at the time bonds were paying 5%, well below what they are paying today.
Another assumption is that the 4% rules is based on life expectancy vs. income needs. Spending in retirement is anything but static and simply adjusting for inflation does not allow for emergencies or major health issues.
Our tax system is another issue that may blow up the 4% rule. Currently, we all expect to pay less in taxes under the new tax laws. These laws will expire, and we have seen that tax laws can be ever changing. Add to that the various types of retirement accounts to draw from and the 4% rule simply does not apply anymore.
When planning for retirement, try to factor in some fluid spending in retirement, and make sure to review your accounts and spending annually.

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