Debunking the 4% withdrawal rate · Client Acquisition Academy

Ermos Erotocritou

May 22 in General discussion

Debunking the 4% withdrawal rate

I get that I may be upsetting some advisors

↳ 61% of financial advisors use 4% as the withdrawal rate for clients

Hear me out.....

Most receive guaranteed income, such as Social Security/CPP, which provides a minimum standard of living

↳ a retiree’s portfolio is generating income in addition to these guaranteed sources

2. Most don’t include the ability to adjust spending during retirement

↳ adjusting spending based on real-life needs and circumstances, can significantly affect spending rates.

My model

60 - 70 - Go-Go Years - lots of money spent on travel and experiences (more money spent)

70 - 80 - Slow-Go Years - less money spent on travel, stay closer to home (less money spent)

80 - 90 - No-Go Years - not much travel at all. Much less money being spent (healthcare?)

3. Planning tools today determine safe withdrawal rates by focusing on whether the goal is accomplished in its entirety and ignore the magnitude of failure using a metric commonly referred to as the “probability of success.” A better approach is to consider the total amount of the goal accomplished each year.

The right withdrawal rate is all about finding balance, and I think 4% is probably too conservative given a more holistic perspective and more realistic ways to quantify outcomes.

Feel free to disagree but this is a great conversation to start

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