Retirement and the 4% Safe Withdrawal Rule

Safe Retirement Withdrawal

The 4% Safe Withdrawal Rule was a retirement planning tool created as a guideline for how much you can withdraw money from your investment portfolio in each year of retirement without running out of money.

In an ideal world, following the 4% withdrawal rule would allow you to plan your cash flow in a way that ensures your financial investments can support you throughout retirement. But as with all generalizations, the 4% withdrawal rule comes with both advantages and disadvantages.

Your withdrawal rate will vary based on things you can’t control—like how long you live, inflation, market returns—and things you can—like your retirement age and investment mix. For example the safe withdrawal rate projects economic and financial conditions at retirement to continue as-is into the future, when in fact they can change in the years or decades after retirement.

Today we’re exploring how the 4% rule came to be and whether it’s still valid for Canadian investors in 2022. Is this still a valid withdrawal calculator? Keith is joined by his colleague, Lawrence Greenberg, who is part of our next-generation advisory team. Together, they discuss the intricacies of this financial theory and whether or not it is applicable in all economic environments.

Retirement withdrawal calculator

• Why we’re discussing the 4% safe withdrawal rule (1:47)
• The meaning and origin of the 4% withdrawal rule (2:25)
• Modifying the 4% withdrawal rule for early or late retirement (6:14)
• Why the 4% rule has become a fascinating concept for Canadian investors (7:26)
• What the research tells us about the retirement readiness of the average Canadian investor (8:43)
• Your burn rate versus the 4% rule (10:40)
• The benefits of figuring out your retirement burn rate (13:55)
• Why the 4% rule needs to be adjusted in the current market landscape (15:12)
• The impact of current stock market valuations and bond yields on future safe withdrawal rates (16:08)
• Critical factors that are not accounted for under the 4% rule (17:34)
• Variable withdrawal rates (19:04)
• One of the main criticisms of the 4% rule (21:06)
• Our approach to planning for retirement cash flow (22:18)
• The three stages of retirement spending (23:23)
• Our key takeaways (25:49)
• And much more!