Article published by CNBC.com
Written by Greg Iacurci
“Market conditions are pressuring the 4% rule, a popular rule of thumb for retirees to determine how much money they can live on each year without fear of running out later.”
“Withdrawing money from one’s nest egg is among the most complex financial exercises for households. There are many unknowns — the length of retirement, one’s spending needs (health costs, for example) and investment returns, to name a few.
“The 4% rule is meant to yield a consistent stream of annual income, and give seniors a high degree of comfort that their funds will last over a 30-year retirement.
“Simply, the rule says retirees can withdraw 4% of the total value of their investment portfolio in the first year of retirement. The dollar amount increases with inflation (the cost of living) the following year, as it would the year after, and so on.
“However, market conditions — namely, lower projected returns for stocks and bonds — don’t seem to be working in retirees’ favor.
“Given market expectations, the 4% rule “may no longer be feasible” for seniors, according to a paper published Thursday by researchers at Morningstar. These days, the 4% rule should really be the 3.3% rule, they said.
“Though the reduction may sound small, it can have a big impact on retirees’ standard of living.
“For example, using the 4% rule, an investor would be able to withdraw $40,000 from a $1 million portfolio in the first year of retirement. However, using the 3% rule, that first-year withdrawal falls to $33,000.
“The difference would be more pronounced later in retirement, when accounting for inflation: $75,399 versus $62,205, respectively, in the 30th year, according to a CNBC analysis. (The analysis assumes a 2.21% annual rate of inflation, the average projected by Morningstar over the next three decades.)”
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Megan Jones joined the ILG Financial team in 2020 as marketing director. Megan and her husband live in Fredericksburg, VA with their German Short Haired Pointer, Gus. Megan is a graduate of Longwood University and holds a degree in communications. Megan is the oldest of Dave Lopez’s three children and not only enjoys working alongside her father, but also with her cousin, Chase, who joined the ILG Financial team in 2020 as an advisor. Megan is also a fully licensed Life, Health, and Annuity agent. When not at work, Megan enjoys sitting on the back porch with family and friends enjoying food and music.
Amy Anderson joined the ILG Financial team in 2023 as the client relations coordinator. Her responsibilities include scheduling of appointments, annual check-up notifications, and annuity and required minimum distribution assistance. She is a graduate of Harding University with a degree in Computer Information Systems. Amy and her husband have two children and she enjoys reading, crocheting, music and spending time with her family.
Terri Center joined the ILG Financial team in 2019 as client services manager. She handles client records, application processing, and gathering information to provide a professional and friendly experience with all of our clients. Terri is a graduate of Oakland University. She is married and has two children. She enjoys hiking, family time, and puzzle challenging video games. She also likes to share her creativity in her canvas paintings and sewing projects.
Jessica Carson joined the ILG Financial team in 2018 as an agent. Jessica and her husband have four children, two dogs, 3 barn cats, 5 chickens, and three parakeets. She indeed loves her children and pets! When not at work, Jessica enjoys playing the piano and cello as well as traveling and spending time outside with her family, hiking, fishing, and boating.
Chase Lopez joined the ILG Financial team in 2020 as an advisor. Chase is a 2016 James Madison University graduate with a degree in management. Chase has been trained under the tutelage of Dave Lopez, who is not only the founder and managing member of ILG Financial, but also is Chase’s uncle and godfather. He also enjoys working alongside his cousin, Megan, who is Dave’s daughter.