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I realize we touched this topic before, but I just watched a YouTube video where the “expert” debunked the 4% rule. His criticism was simply that is not how people spend money. He said nobody lives on the percent they withdraw giving the example that if a person had $1,000,000 and took $40,000 they may need more money for unexpected spending. Thus they will take extra from the $1,000,000
That’s like saying nobody can live on a pension or salary for that matter because they may need more money.
I thought that using a percent withdrawal meant your income from that was the income (plus SS) on which you decided to live. And perhaps aside from a separate emergency fund, all spending was to come from the withdrawal amount.
In other words, the $40,000 in the example is analogous to pension income. Do I have this wrong?
The 4% rule generally assumes retirement savings are the primary source of income, supplemented by Social Security and an emergency fund. The 4% you withdraw is equivalent to your pension income, the amount you decide to live on, while your emergency fund and other income are an additional buffer and are not included in this 4%. In other words, 4% is not a fixed spending ceiling, but a guide to ensure long-term sustainable spending.
Amen
You’ve explained it really well, and I agree with your analogy to a pension or salary—that’s essentially how the 4% rule is meant to work. The “expert” you mentioned isn’t wrong in saying real-life spending doesn’t follow a neat percentage, but that’s also why many people view the 4% rule as more of a guideline than a rigid formula. It’s designed to give you a sustainable baseline withdrawal rate over a 30-year retirement horizon, not to account for every unexpected expense along the way.
That’s where an emergency fund, or even a “flexible spending” mindset, comes in. Some retirees adjust their withdrawals slightly up or down depending on markets and needs—almost like giving themselves a raise or tightening the belt in certain years. So in practice, it’s less about locking yourself into exactly 4% every year and more about having a framework to avoid depleting your portfolio too quickly.
Do you think you’d feel more comfortable with a strict rule for withdrawals, or do you prefer a flexible approach where spending shifts a little depending on life events and market performance?
Flexible for sure, but not by playing with the withdrawals from a designated retirement pool of money. And I would not be comfortable being flexible based on market performance.
My spending is based on a fixed monthly pension, it will never change so to be flexible I need additional resources which I built over decades.
If I were using a withdrawal strategy on my own, I would do the same. I would not attempt to be flexible with my basic income source. That would drive me nuts.
i just don’t think most retirees with less financial sophistication than many HD readers can handle other than a simple more or less fixed withdrawal strategy.