In an article in MarketWatch, the writer, Angie O’Leary discusses why the 4% rule for retirement savings may be outdated and suggests that most people will need to adjust their withdrawals up or down as they age.

The longstanding 4% rule was developed in the mid-1990s to answer the question, “How much can I safely withdraw from my retirement savings each year and have my nest egg last for the duration of my retirement?”

While this simple rule of thumb still stands strong despite numerous studies designed to prove it inadequate, it is important to understand the original assumptions that went into creating the rule and then take a modern view to get a more comprehensive answer to that important question.

In 1994, financial adviser William Bengen introduced the concept of the 4% rule, which found that retirees who withdrew 4% of their retirement portfolio balance and then adjusted that dollar amount for inflation each year thereafter, would create a paycheck that lasted for 30 years.

Now 20 years out from the publication of Bengen’s study, experts recognize that this simple rule of thumb needs some modernization.

The most significant issue with the 4% safe withdrawal rate is that there are just too many unknowns for the retiree: How long will you live? How will the financial markets perform? Where are interest rates and inflation rates going? What will your retirement expenses actually be and how will they change over time? What about your health care needs? How will your taxes be impacted by your retirement income? What about the Medicare surcharge?

Continue reading the entire source article.