Many retirees wonder how much they can withdraw from their retirement portfolios each year, while still having a strong asset base. A common guideline has been 4%, known as the “4% Withdrawal Rule.” In recent years, this strategy has sparked major discussions among academics and professionals as to whether or not it’s still a viable guide for today’s retirees.  Before we can answer the question, we first need to understand what the strategy actually means.

The 4% Withdrawal Rule began over 20 years ago. It’s a suggested formula for withdrawing money from your investments while still making it last through retirement, approximately 30 years. Using this method, let’s say that you retire with $1 million of assets. In each year of retirement, the rule said you could withdraw $40,000, which is 4% of $1 million. While it may seem like a 4% withdrawal rate is a good “rule” of thumb, what it fails to take into account is stock market volatility and inflation – both of which have become familiar in recent years and may impact your retirement strategy.  Life expectancy has increased now too, so your money may need to last even longer than 30 years.  Overall, each person’s strategy is different and there is not a “one size fits all” when it comes to your retirement income.

Wade Pfau Ph.D., a retirement expert renowned in the finance industry for his research on the matter, currently states that “in a lower interest rate world, a 3% withdrawal rate reflects something closer to a chance of success than a 4% withdrawal rate historically provided….”* Although growth of your assets during your earning years is important, the payout during your retirement years is critical. Being aware of your financial options will help ensure that your money can provide the lifestyle you desire for as long as you live.**

One of those financial options is a product that is designed to guarantee principal protection, offer potential returns and deliver retirement income…possibly for life: a Fixed Index Annuity, or FIA.** With FIAs, when the related market index has grown during your crediting period, you participate in a portion of those gains. If the index experiences a low, your locked-in earnings are not affected, thus providing protection for both your principal and credited interest.

In the end, it’s important to find a balance between your lifestyle and having enough financial resources if the unexpected occurs.  Consult with a financial professional and a tax advisor to ensure you are knowledgeable of the options available, as well as potential benefits and penalties.  It is possible to achieve your financial retirement goals, it just takes a little work to get there.

Pinnacle Plus Financial insurance professionals make it their mission to help you protect your assets and solidify the reasons you’ve worked hard your whole life: to reach your Pinnacle.  They help empower you to make well-considered financial decisions by assisting you in the development of strategies to make your money last.** For more information, visit or call 913.254.3030. 

Insurance products offered through Pinnacle Consulting Group LLC dba Pinnacle Plus Financial and dba Senior Plus Advisors.
Investment Advisory Services are offered through Pinnacle Wealth Management, LLC, a Registered Investment Advisor (Overland Park, KS 913.254.3030). Member FINRA #153896.

* ”Does the 4% Rule Work in Today’s Markets?” Wade Pfau’s blog “Retirement Researcher,” July 7, 2016:

**Annuity guarantees rely on the financial strength and claims-paying ability of the insuring company, and compliance with product requirements.  If not part of the base contract, riders may be available for purchase to provide income for life.