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Episode 91: The 4% Rule – A Starting Point, Not a Solution

If you’ve done even a little research on retirement planning, you’ve probably come across the 4% Rule. It’s one of the most cited—and misunderstood—retirement strategies out there.

In Episode 91 of the Last Paycheck podcast, CERTIFIED FINANCIAL PLANNER® Archie Hoxton and advisor Jimmy Sutch take a fresh look at this popular rule of thumb. They explore where it came from, how it works, and most importantly—why it’s a starting point, not a solution.

What Is the 4% Rule?

The 4% Rule suggests that if you withdraw 4% of your retirement portfolio each year, adjusted for inflation, your money should last 30 years. It’s based on historical data, assuming a balanced 50/50 stock and bond allocation.

For example, if you have $1 million saved, the rule says you could withdraw $40,000 in your first year of retirement, and increase that amount slightly each year to keep pace with inflation.

Why It’s Popular—and Where It Falls Short

The 4% Rule is simple. That’s part of its appeal. But real life rarely follows the neat assumptions built into the original model.

Here’s where the 4% Rule runs into trouble:

  • It assumes a fixed 30-year retirement. What if you retire early and live into your 90s?
  • It assumes steady market performance. What if you hit a bear market in the first few years?
  • It assumes predictable spending. What if you need to fund long-term care or help a family member unexpectedly?

Archie and Jimmy explain that while the rule is helpful for rough estimates, it ignores the fluid nature of real-life retirement planning. Retirees often need to spend more early in retirement before Social Security kicks in—or during high-spending years like early travel or home renovations.

Ask Yourself:

  • Is my retirement plan flexible enough to handle early market downturns?
  • Have I adjusted for taxes, healthcare, and changing income needs over time?
  • Am I prepared to draw more than 4% some years—and less in others?

A Better Approach: Dynamic Planning

Archie and Jimmy encourage listeners to treat the 4% Rule as a guideline, not gospel. Instead of a fixed rule, they recommend:

  • Creating spending guardrails that adjust for market performance
  • Using tax-efficient withdrawal sequencing based on account type and income
  • Coordinating Social Security timing with drawdown strategies
  • Re-evaluating the plan annually—not just once at retirement

Final Thought

The 4% Rule can be useful when you’re asking, “Do I have enough to retire?” But when you’re asking, “How do I make this money last through uncertainty?”—you need something more personal, more flexible, and more strategic.

Want a sustainable retirement income plan that evolves with your life?

Download the 4% Rule: A Starting Point, Not a Solution Worksheet and schedule a no-pressure consultation at www.hoxtonpm.com/schedule. Let’s build a plan that works in the real world.
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Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.