One of the pillars of modern financial planning is the so-called 4% rule. It refers to the finding made after considerable research by financial planner William Bengen in 1994 that withdrawals of 4% a year from a retirement account holding a balanced portfolio consisting of a 60/40 mix of stocks and bonds wouldn’t run out of money over a 30-year retirement.
Bengen based his “rule” on the results of such a portfolio’s performance over all 30-year time spans since the 1920s, which meant that even if you started saving and investing for retirement when the market boomed and then retired and began your withdrawals at a time when markets had sunk, your nest still would be sufficient to carry you through your non-working years.
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