This article proposes a replacement I will tentatively call the “Retiree Discretion Rule”, or RDR, which is designed to remove the weaknesses of the 4% rule. The principal weakness of the 4% rule is that the retiree does not know and cannot easily control the risk that is involved. The RDR makes this risk explicit and places it under the retiree’s control. The RDR calculates the initial monthly draw from the retiree’s assets, based on the following inputs. Retiree’s ageRetiree’s sexValue of financial assetsAnnual inflation rate desiredAge to which retiree wants monthly draws to last – life spanRate of return on assetsHere is an example.

Source: Forbes September 15, 2018 07:30 UTC