The 4% Rule: How Does It Say I Should Allocate My Investments?

[@dn5582]

You are fabulous explaining this oftentimes complicated subject. Well done!

[@dznrocks6605]

Awesome information. You make a great point about looking at your portfolio every year, because some years you might be able to pull more money. Other years you might need to tighten the belt. Awesome channel!

[@RootFP]

Thank you!

[@SunAtNight731]

Wonderful video, James! Question: where do mid-cap stocks come into play in Guyton's asset allocation?

[@9-1-juan6]

Hey James, let me know if I am totally mixing up concepts here, now that 30-year treasury-bonds are starting to break into the 5% range (hey maybe it goes to 6%) can I now start thinking since I'll be getting over 4% then I'll just park my money in these t-bonds? Why would that not be a good idea? What factors are being missed in that thought process? (inflation, stock value gain/loss, etc?)

[@RootFP]

The 4% rule assumes that you'll be increasing your withdrawal rate each year to account for inflation. A 30-year bond will pay you more than 4% in interest today, but those interest payments remain fixed while the cost of everything you purchase goes up.

[@DiNap44]

Great info James. Much appreciated.

[@RootFP]

You’re welcome!

[@bryanwhitton1784]

How do you incorporate the RMD into your withdrawals? I have started to do some basic tax expectations with regards to my RMD and it seems I will have invested into my 401K well but I am going to pay far more in taxes as they come out due to RMD withdrawal rates. I would like to see more information regarding this. Also, as you withdraw because of RMD what are the ramifications of reinvesting the funds withdrawn. I seem to have been duped into delaying the payment of taxes until I retire but my RMD rate is so high I will be paying more in taxes than I would have paid if I had paid them up front. I hope I am looking at this wrong.

[@LasVegasImp]

Useful.

[@gazinger]

if I need to revisit the portfolio frequently, what is the point of 4% rule?

[@johnrusso4943]

Please help me understand what it means by "investing in bonds". That sounds like a stupid question, but pleass hear me out. I'm especially curious how my question applies to the 4% rule and variant rules. My confusion is that "investing in bonds" is vague. The option available to me is to invest in bond funds. I see that as much different than investing in individual bonds. My understanding is that an individual bond gives you a rate of return. However, aren't bond funds highly dependent upon the management? They trade bonds. Depending upon the timing of those trades it might not be as protective as thought. I would think a conservative piece of the portfolio would be some type of fixed return investment. I don't see that when investing in a bond fund. They can always sell bonds at a loss and lose money.

[@johngill2853]

Bond funds also give you a rate or return, it's called the funds yield. You can invest in a bond index fund to get rid of management risk. Yes bond funds can loose money but it is also possible to loose money if you sell an individual bond.

[@jeanettebonf631]

My 61

[@lingeng2659]

Is it assume the return being 5%? If you take out less than the return, you will not run out of the base.

[@travis1240]

Two problems with that. 1. Inflation 2. Timing risk. In some years your portfolio may be down 20 percent.

[@johngill2853]

Yes if you take out less than your return it's impossible to run out of money. Problem is what would you do in a down year. If you are worried about taking 4 percent plus inflation, simply take 3 percent. But 4 percent plus inflation has proven very safe and in most cases 4 percent leaves you with a larger amount than you started with

[@bruced.370]

Thank you for this I have been saying this for years that the 4% rule is an old rule that has to be adjusted. You are the only financial person that recognizes this. Also, the bond yields need to be reevaluated for the current yields and most importantly is that expenses decrease in retirement per BLS govt website data shows. 85 yr olds spend less than 65 yr olds. 🤑

[@Antandthegrasshopper]

Man.. you're sharing great information! Appreciate it!

[@RootFP]

You’re welcome!

[@R.and.R.]

Always helpful information James. Thanks.

[@RootFP]

You’re welcome!

[@christaylor8022]

Great information as always James, thank you!

[@RootFP]

Thanks Chris!