In a recent interview with blogger and financial advisor Michael Kitces, Bill Bengen, the “father” of the 4 percent rule, admitted that he advised his clients to withdraw as much as 4.5 percent of their retirement savings annually and in today’s world those numbers could be higher.
In Kitces’ podcast, Bengen stated that when he researched the 4 percent rule in the 1990s, there were mainly two asset classes: large-cap stocks and intermediate government bonds. Today, there are many more investment opportunities.
“I did a research paper a couple of years ago where I just used small cap stocks very, very heavily. It turns out the withdrawal rates were off the charts,” said Bengen. “Imagine trying to retire with a 25% withdrawal rate, taking a quarter of your portfolio and lasting 30 years. But there have been a number of situations where that prevailed, and many other situations there have been double-digit returns as the norm with small cap stocks. So, there are still a lot of things to look at.” Read the full transcript of the interview.