The 4% Rule's Dark Secret: Retirement Planning in Crisis The traditional 4% withdrawal rule has been touted as a foolproof strategy for maximizing lifetime retirement income, but new research reveals that this approach is actually a recipe for disaster.
American Enterprise Institute senior fellow Mark Warshawsky and independent researcher Gaobo Pang have simulated four different retirement income strategies for a hypothetical 65 year old with $1 million in savings, finding that relying solely on the 4% rule can lead to catastrophic consequences.
Warshawsky and Pang's study highlights the importance of partial annuitization – converting a portion of one's savings into a guaranteed income stream.