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A common and recurring theme in retirement planning is the “4 percent” rule of thumb on post-retirement spending. That rule suggests that retirees who restrict their annual expenditures to only 4% of their invested nest egg, adjusted for inflation, can ride their retirement savings for their remainder of their lives.  By way of basic example, someone with $2 million in investment savings should generally able to spend $80,000.00 per year in retirement.

That said, risks abound in the event of stock market reversals, weak investment returns, intervening medical or life care emergencies, and the very real possibility of increased lifespan.  The “4 percent” rule is therefore not so much a rule as it is aspirational goal, subject to unexpected vagaries of real life – and not the world of the theoretical.

The “4 percent” rule may be best implemented with a very cautious and conservative approach to post-retirement spending, and with a view toward rapidly improvising and adjusting one’s approach if retirement conditions change.

Pecos Law Group recommends seeking the advice of your Certified Public Account and/or qualified investment advisor before making any financial decisions relating to your retirement.


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