Why the 4% Retirement Rule May Not Suit Every Saver

If you are mapping out retirement, one of the best-known rules for making savings last may not fit every situation.

A recent Prudential survey found that 54% of retirees would prefer to leave money to their heirs rather than take the risk of outliving their savings.

“People get to retirement and they’re so emotionally invested in the balance that they are having trouble pulling the money out and they are not living the life that they saved for as a result,” said Jean Chatzky, author and AARP personal finance columnist.

For years, the so-called 4% rule has advised retirees to withdraw about 4% of their savings annually. It assumes a portfolio mix of stocks and bonds and draws on historical market returns.

According to MoneyWatch, the 4% rule for annuities can be useful for comparing income choices, showing the importance of longevity protection, and drawing attention to inflation and flexibility.

Still, research highlighted by KVIA points to the benefits of a more tailored strategy.

That may involve pairing investments with other sources of income, such as annuities. Even so, annuities are not the right choice for everyone.

The main lesson: weigh your expenses, taxes and need for flexibility rather than depending on a single percentage to shape your entire retirement plan.