For those of you without cushy pensions, I’m sorry folks. The 4 percent rule is outdated. It is now unwise to follow the 4 percent rule as a proper safe withdrawal rate in retirement. Instead, I highly recommend lowering your safe withdrawal rate closer to 0.5 percent to 1 percent for the first year or two after you retire.
The Federal Reserve and the Central Government have made reaching financial independence and living off only retirement income more difficult. Interest rates have come way down, which means it requires a lot more capital to generate the same amount of risk-adjusted returns.
As a retiree or soon-to-be retiree, taking on more risk is exactly the opposite of what you should do. Once you have won the financial game, your goal is to never go in reverse again.
This is a long article. Therefore, if there’s one thing to remember, it’s this equation:
Proper Safe Withdrawal Rate = 10-year bond yield X 80%. If you follow this safe withdrawal rate formula, you are going to do just fine in retirement.
The Evil Fed And Government
After sending out my weekly newsletter saying we should all be thankful to the Federal Reserve for bailing us out, a number of readers sent angry responses. Here is one of the more lengthy ones.
The Fed is terrible.
They create debt, they print money, they weaken the dollar, and they create socialism. They also ensure there is an unhealthy power grab at the central government. We now accept that the central government is the babysitter, mother, and protector of us when we stub our toes financially, physically, or by other means such as a national disaster.
The Fed has NEVER been audited. I’m sure you know that. It’s also a private business made up of private bankers that control our money supply.
Need some QE? Here comes the Fed with their massive printing press and voila! We have more money in the system. Need to artificially support the stock market? Voila! Here comes the Fed with massive money pumping and now we have industries that are protected by US tax dollars.
So to me, this isn’t positive news because the elephant in the room needs to be fed. We are simply kicking that can down the road so we can continue buying all our toys, big homes, and make believe that everything the US government and the Fed are doing is good for us.
It’s only good for bankers. We are the sorry fools who have to pay the tax bill on 27 trillion in debt….and it’s still growing.