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Opinion: The inventor of the ‘4% rule’ just changed it.


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2020 Oct 23, 5:15am   993 views  16 comments

by Al_Sharpton_for_President   ➕follow (5)   💰tip   ignore  

Bill Bengen says the now-iconic rule was always treated too simplistically.

It’s been more than 25 years since Bill Bengen, a financial adviser in southern California, created the so-called “4% rule.”

That’s the principle that if you want to make sure your retirement savings last at least as long as you do, you should budget to spend no more than 4% of the balance in the first year—and then just adjust the amount each year in line with inflation.

Bengen called his rule “Safemax”—the maximum amount you could withdraw each year and still say “safe.”

Since his article appeared in the Journal of Financial Planning in 1994, the 4% rule has suffered the fate usually reserved for religious doctrines—alternately cited as revealed truth, such as here and here, denounced as heresy, or subject to various forms of reformation, such as here and here.

But still it has persisted, and spread, as a pretty useful rule of thumb. If you want to make sure you don’t outlive your savings, goes modern financial advice, budget on withdrawing no more than about 4% of your portfolio in your first year of retirement, and then only adjust upward in line with inflation.

Well, now comes news that Bengen—who has sold his financial planning practice, and moved to Arizona—has updated his numbers.

Not only is he no longer sticking to 4%, he says that that number was always treated too simplistically.

"I came up with this 4% idea to promote my financial planning business, and it worked. Now that i am in the 1%, I can level with people.", said Bengen.

"The reality is, that we are all gong to die at some point. No one gets out alive." "And that is why I am promoting my new book - Hookers, Blow and Viagra - And How to Get There."

With several high profile endorsements, including the Biden family, CNN and the Clinton Foundation, Bengen is optimistic about book sales and his upcoming Netflix special. "Look, we are trending even with Cuties, and except for a little T&A by Hillary Clinton, there is little nudity."

https://www.marketwatch.com/story/the-inventor-of-the-4-rule-just-changed-it-11603380557?siteid=yhoof2

Comments 1 - 16 of 16        Search these comments

1   🎂 Tenpoundbass   2020 Oct 23, 6:50am  

Economic rules don't give a rats ass if your president is orange or black, money gonna money.

This sounds like during the RE bubble they changed the hard economics 101 rule from "Don't spend over 25% of your income on housing" to 35% of your income, or all of it, if the interest rate is low enough, there shouldn't be a cap on how much you spend. I said that was stupid, that I'll never spend over 25%, and what happened to all of the retards spending over 25% of their income on housing?

The article should read, if you have to spend over 4% of your retirement in the first year, then you didn't save enough. Then offer some pointers on how to get a job as a Walmart greeter.
2   Ceffer   2020 Oct 23, 11:12am  

Al_Sharpton_for_President says
"And that is why I am promoting my new book - Hookers, Blow and Viagra - And How to Get There."


After budgeting savings for these things, there is only negative ten percent a year left to live on. Thank God for social security and food stamps.

Don't even mention the Hummers and the artificial knee/hip implants (or the wife's breast implants).
3   HeadSet   2020 Oct 23, 11:22am  

Don't even mention the Hummers and the artificial knee/hip implants (or the wife's breast implants).

You really think that geezers on SS and food stamps would be so frivolous as to spend money on a wife's breast implants? C,mon man, that's low. The breast implants would be for the Mistress....
4   Ceffer   2020 Oct 23, 11:25am  

Yeah, maybe selective spending. Braces, breast implants, and school girl dresses and lingerie for those hookers leave wifey at the back of the line.
5   zzyzzx   2020 Oct 23, 11:51am  

Notice how the article fails to mention what the % in the rule should be.
6   SunnyvaleCA   2020 Oct 23, 12:35pm  

zzyzzx says
Notice how the article fails to mention what the % in the rule should be.
The article seems to give a range and some examples of what rates would be successful. Often, those rates are higher than 4%. Many retirement planning tools out there on the internet are similar in that they give a range of possible outcomes or likelihood of a "successful" outcome.

The larger problem with retirement is planning for catastrophic societal breakdown and changes in government taxation. (Maybe in that order, but maybe in the opposite order.) What happens to your retirement if, with 30 years to go, Chairman Kamala dictates a confiscation of all wealth above $1MM? Or you are kidnapped by the local Antifa or BLM chapter and held for ransome? What if a CHAZ area springs up around your home or if the local government union decides a 20% property tax is more reasonable? Maybe the banksters are looking for some massive stagflation to help pad their end-of-the-year bonus.
7   Misc   2020 Oct 23, 12:45pm  

... or like Schwab did, just make up a charge and steal money from people's retirement accounts.
8   Booger   2020 Oct 23, 1:55pm  

SunnyvaleCA says
Or you are kidnapped by the local Antifa or BLM chapter and held for ransome? What if a CHAZ area springs up around your home or if the local government union decides a 20% property tax is more reasonable?


Yet still more potential problems that are easily solved by owning a M134.
9   Booger   2020 Oct 23, 1:55pm  

Misc says
... or like Schwab did, just make up a charge and steal money from people's retirement accounts.


Got a link?
10   Misc   2020 Oct 23, 2:20pm  

Booger says
Misc says
... or like Schwab did, just make up a charge and steal money from people's retirement accounts.


Got a link?


Back before July1999 they charged margin interest on loans on IRA accounts. So the charges were illegal, Chuck's not giving the money back.
11   Misc   2020 Oct 23, 6:58pm  

There were also duplicate sell orders. If a customer had 1000 shares of IBM in the account, he could place a 'good till cancel' order to sell them at a fixed price. If he forgot about the order and placed another sell order, Schwab would accept the duplicate order while leaving the original order outstanding (this was on the assumption the customer would simply bring in another 1000 shares which very rarely happened). Anyways, frequently both orders were executed. Now if the stock went up in price, the customer would have to buy back the short position, leaving him out a few thousand dollars. If the stock went down in price, and the customer didn't have an extra 1000 shares lying around; Schwab would buy back the position, but take the gains out of the account (as they were ill gotten gains). It wasn't really much of a challenge to get the customer to say "thank you" when taking the money out of the account.

Now legally, Schwab did not have to take the money out of the account, but legally they could. Choices, choices we snagged the money.

Investing is a learning experience, but has left me quite jaded.
12   Patrick   2020 Oct 23, 7:51pm  

@Misc I worked at Schwab for 5 years in SF. Mostly it seemed pretty ethical, but I did hear some things like that, where the rules were ambiguous.

Another one was that there are many abandoned accounts, which I think become property of the state eventually - if the state finds out about them.

Not sure how people manage to abandon brokerage accounts. Maybe they move without a forwarding address and then die. Or the account was illegal for some reason.
13   HeadSet   2020 Oct 24, 7:53am  

Another one was that there are many abandoned accounts, which I think become property of the state eventually - if the state finds out about them.

Yes, that is a biggie. In VA, and in other states, financial institutions must take action on accounts with one year dormant activity. That action involves attempting to contact the owner, and if no contact, the money must be remitted to the state's "found property" agency. For non-financial institutions, such as holders of rental deposits and store accounts, the term can be up to 5 year to take action on dormant accounts. Any company that is absorbing account balances and deposits is just one whistle blower away from some hefty fines, no matter what accounting trick is used to "hold" the funds.
14   B.A.C.A.H.   2020 Oct 24, 8:37am  

..."...Taylor, a UK citizen and resident who has never set foot in California, asserts he was not paid the correct value of his 52,224 shares in Intel by the California Controller when the state seized his employee benefit account and liquidated its holdings in 1990.

When Taylor discovered in 2001 that his account had been escheated, the state of California had already sold the shares for US$300,000. Taylor first sued Intel in 2001 and won a partial victory — he received about US$750,000 worth of restricted stock reflecting the US$300,000 Intel recovered from the Controller’s office and an additional US$450,000 from Intel. Palmer insists that the state of California should have paid Taylor about US$3.8 million, the value of his shares in 2001 when he tried to claim his account...."...

..."...Taylor, a former Intel employee, had failed to cash dividend checks or vote proxies for more than three years. So the state of California presumed he had abandoned the account and seized it even though he had held onto stock certificates evidencing ownership in his safe deposit box at an English bank...."...

Always vote your proxy.


from https://finopsinfo.com/investors/us-supreme-court-asked-to-address-rights-of-unclaimed-account-holders/
15   AD   2020 Oct 25, 12:10am  

HeadSet says
Yes, that is a biggie. In VA, and in other states, financial institutions must take action on accounts with one year dormant activity.


I know for brokerage accounts like with Vanguard, Schwab, Fidelity, etc that you list your trusted contacts, as well as your primary and secondary beneficiaries. That way they contact them if they cannot reach you.

.
16   Patrick   2020 Oct 25, 8:21pm  

B.A.C.A.H. says
Always vote your proxy.


Thanks! This is a good tip. Sometimes I throw them away, but they are documentation of ownership.

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