The "4% plan" is a way to explain the problem for your avg Joe who can't do math. It's a nice rule of thumb (often you'll see 3% even) but doesn't leave a ton

The "4% plan" is a way to explain the problem for your avg Joe who can't do math. It's a nice rule of thumb (often you'll see 3% even) but doesn't leave a ton of room. Just look at the current environment if you need an example: Lots of people who retired in the 90s are getting killed on their principal. Sensible planning involves calculating the probability that you will not outlive your assets: Portfolio planning will pick points from the so-called efficient frontier, and then often run Monte Carlo simulations to get a handle on whether the expected variation will put you in the poor house. BTW, this is usually where the 3-4% plans arise from. People will make an assumption about return+variation, and then see what withdrawal is likely (but not guaranteed) to avoid outliving the principal.