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The idea is that if broader stock market returns 7% on average per year. Your 4% withdrawals include compounding inflationary adjustment without dipping into th

• jacquesm 4y ago
  That's effectively 'timing the market' though. Because the broader stockmarket may well not realize those returns when you need them most. But sure, if you see having your funds in the stockmarket as risk free and guaranteeing you that 7% then you can base your retirement strategy on that. Savings = Cash in the bank Stocks = an asset class, so an investment, which has an ROI but also a risk (the ROI is effectively a risk premium) The bulk of the people that have this kind of money will have the majority of it in the form of home equity, not in the form of savings in the bank or stocks. Depending on where you live your first healthcare crisis can wipe out that million easily.
  • nighthawk454 4y ago
    GP is also not quite right. The point of the 4% rule is it's the historically maximum safe withdrawal rate. You're not assuming a 7% return here. You're assuming that there's not been a time ever where 4% wasn't indefinitely sustainable. https://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/ https://www.mrmoneymustache.com/2012/05/29/how-much-do-i-nee...