Daily Money - RIP to the 4% Rule

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March 4, 2025

If you’re actively planning for retirement, you might be familiar with the 4% rule. It suggests that withdrawing that percentage of your savings annually (and adjusting for inflation thereafter) will leave you financially secure for at least 30 years. 

According to the research of William Bengen — who is credited with coming up with the 4% rule — that should allow someone who retires at age 65 to have enough money to stretch until at least age 95.

The issues I have with this plan are twofold:

1. The research was published in 1994. Thirty-one years later, the full age of retirement (for those born after 1960) is now 67, which makes the equation a lot different.
2. The entire premise is based on having to liquidate the assets in your retirement account in order to generate income. 

There’s a better way.

No matter when you decide to retire, if you build a portfolio focused on dividend income, the underlying assets (i.e., shares of yield-producing stocks and ETFs) never need to be sold in order to produce income. Rather, they continuously spin off yield that allows your holdings to maintain their principal value.

The idea is that, instead of worrying about limiting your withdrawals to 4% to stretch throughout retirement, you can invest in high-quality, reputable stocks and funds — e.g., dividend ETFs, Dividend Aristocrats and Dividend Kings — that let your money work for you.

Life expectancy in the U.S. has increased by more than 27% since 1960. If you’re planning on amassing retirement savings that can last you until age 95, consider doing so in a way that allows you to not have to exhaust your principal while also enabling you to pass along those assets to your kin. Generational wealth, here you come.

— Jordan Chussler, investing and banking editor

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The Social Security Administration has begun issuing retroactive payments to 3.2 million Americans slated to receive additional benefits under the Social Security Fairness Act. The new law eliminates two other laws that limited the benefits that could be collected by people who get certain kinds of public pensions.

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• 🏛️ Claiming Social Security at 70 Is Risky. Here's Why
• 🪴 Retirement Experts Provide Tips for Saving at Any Age
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