The 4% Safe Withdrawal Rule.

About This Episode

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

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

Today we’re exploring how the 4% rule came to be and whether it’s still valid for Canadian investors in 2022. 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.

Key Topics:

• Why we’re discussing the 4% safe withdrawal rule (1:47)
• The meaning and origin of the 4% rule (2:25)
• Modifying the 4% 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 (8:43)
• Your burn rate versus the 4% rule (10:40)
• The benefits of figuring out your burn rate (13:55)
• Why the 4% rule needs to be adjusted in the current market landscape (15:12)
• The impact of current stock 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 retirement cash flows (22:18)
• The three stages of retirement spending (23:23)
• Our key takeaways (25:49)
• And much more!