Tresidder - The 4% Rule and Safe Withdrawal Rates In Retirement

The 4% Rule and Safe Withdrawal Rates In Retirement

Uncover the Little-Known Risks Hiding Behind The 4% Rule So That You Can Retire With Financial Security And Peace Of Mind

Todd Tresidder

Copyright 2012 Todd Tresidder

All rights are reserved.

With the exception of brief quotations in a review, no part of this report may be reproduced or transmitted, in any form, or by any means, including electronic, mechanical or photocopying, recording, faxing, emailing, posting online, or by any information storage and retrieval system, without written permission from the publisher.

Published by FinancialMentor.com

ISBN: 978-1-936539-89-5

Disclaimer

This publication represents the opinion of the author regarding the subject matter covered. It is for educational purposes only. The publisher and author neither imply nor intend any guarantee of accuracy. It is offered with the understanding that neither the publisher nor the author is engaged in rendering legal, tax, accounting, investment planning, or other professional services, nor is this information intended to be a substitute for such services. Should specific advice be necessary or appropriate, the reader should seek that information from a competent professional. The author and publisher particularly disclaim any liability, loss, or risk taken by individuals who directly or indirectly act on the information contained herein. The author and publisher believe the education presented herein is sound, but readers cannot hold either party responsible for either the actions they take or the results of those actions. While every effort has been made to make this book as complete and accurate as possible, there may be mistakes, both typographical and in content. The education contained in this book may not be suitable for everyone; use at your own risk.

Foreword

Financial information is just like Goldilocks and the Three Bears. Too much. Too complicated. Too confusing. Its seldom just right.

Too Short: The Internet is filled with sound-bite-length half-truths forcing you to waste hours searching repetitive and contradictory articles to uncover the whole truth.

Too Long: The bookstores are filled with multi-hundred-page tomes padded with fluff chapters like A Brief History of the Financial Markets and What Is a Stock? when all you need is 10 pages of concrete ideas you can put to use.

Too Simple: The financial content mills produce reams of articles for magazines and web sites written by professional writers who arent financial experts and lack practical experience.

Too Complicated: Academic journals have great research, but its written in an inaccessible style using financial geek-speak so that only a trained expert can decipher the encrypted meaning.

Frankly, Im tired of financial fairy tales so that is why I wrote the 60 Minute Financial Solutions series of ebooksso that you could have the just right next step.

Each ebook provides a concise, definitive answer to an essential financial question that youll inevitably confront on your path to financial security. Each ebook is a one-stop solution to a single financial issue so you learn exactly what you need to know, when you need to know it.

What you get with each ebook is the distillation of everything that is valid and the elimination of everything that is not. The goal is to simplify without oversimplifying so you can make an independent, intelligent, and appropriate financial decisionin about 60 minutes.

Best of all, these books are written by a genuine financial expert. I was trained as an economist and Ive published in the academic world. I also refined my practical knowledge as a hedge fund investment manager for more than a decade with 100% winning years (except one small loss of less than 3%). I now work as an educator coaching people just like you to achieve their financial goals.

In short, Ive spent a lifetime mastering personal finance and investing so you dont have to, and Ive condensed all that experience into this solution-oriented series of ebooks. The stuff that works is in these books, and its provided in straightforward language to make it as accessible as possible.

The goal is to empower you with the knowledge necessary to take charge of your finances and achieve your goals. Ive taught many others and I can teach you as well. Financial security really is possible if you just know what you are doing and take the right actions. It doesnt have to be complicated.

All you need is the right informationnot too much, not too little, not too simple, not too complicatedjust the right stuff.

If this book delivers on its promise, please let me know with a favorable review so I can thank you. If it doesnt, please write me at so I can send you a refund and correct any potential problem.

Thanks for your support!

A Brief Note About Reader Level And Defining Terms

No financial education book can perfectly address every readers needs. After all, each of us brings a different experience base and level of financial sophistication to the written page.

In other words, what is complicated to one person is oversimplified to the next making writing for a wide audience difficult.

In an effort to maintain brevity and respect all readers needs Ive assumed base level financial sophistication and chosen to not define every financial term contextually.

Instead, less familiar terms are defined in the endnotes at the back and linked within the text. That way advanced readers arent confronted with unnecessary definitions that distract the flow of writing while readers newer to the subject can easily resolve any confusion by following the links to find terms requiring greater explanation.

Introduction

What do retirees in 1921, 1966, and 2010 have in common?

Very littleand thats the problem.

Each faced a different life expectancy and invested in a different economic climate with varying inflation expectations, interest rates, and market valuations.

The truth is that these dates werent chosen at random: One had the highest safe withdrawal rate in recorded history, the other the lowest, and the third barely survived the ravages of inflation.

Each of these three retirees lived through dramatically different economic times, yet according to conventional wisdom they all share the same safe withdrawal rate in retirementroughly 4%.

It makes no sense.

How can a static, one-size-fits-all solution to a problem as varied and complex as knowing how much money you need to retire be correct? How could retirees in 1921, 1966, and 2010 share the same safe withdrawal rate when market valuations, interest rates, inflation expectations, and expected lifespans were completely different.

Its impossible. Its wrong.

Yet, that is the conventional wisdom in the financial planning profession. It is known as the 4% Rule, and it is widely considered to be the truth in safe withdrawal rates for retirement.

The problem is its not the truth and every day people risk a lifetime of retirement savings on it. There are better solutions.

In this book I reveal the problems hiding behind the 4% Rule and provide you with practical solutions you can implement for your retirement security.

Why Safe Withdrawal Rates Are Critically Important