It’s September! If you’ve been listening to the show for the past few months, then you know that I’m on what I’ve dubbed my September Sabbatical, in which I’m traveling the globe and taking a break from podcast production.
In light of that, we’re digging through the archives and airing some of my favorite interviews on the show, in between airing interviews I’ve done on other podcasts.
Welcome to another episode from our archives! This one was recorded in March 2018, and Dr. Wade Pfau had a ton of insight into the four percent rule that so many of us are concerned with.
First, here’s a brief history of how the four percent rule came to be.
In 1994, William Bengen decided to look at 30-year timespans throughout U.S. History, beginning with the year 1926.
He worked under the assumption that a retiree held 50 percent stocks (in the form of S&P 500 Index), and 50 percent bonds (intermediate-term government bonds).
He looked at two things: the worst-case scenario, and how much an investor could sustainably withdraw from their portfolio under that worst-case scenario.
The year 1966 ended up being one of the worst to retire during, and an investor could withdraw 4.15 percent during the first year, and 4.15 percent, adjusted for inflation, every subsequent year.
That is how the 4 percent rule came to be.
Dr. Wade Pfau, a Professor of Retirement Income at The American College of Financial Services, argues that the 4 percent rule may not be the end-all-be-all we think it is.
He voices his hesitations and explains how you can determine how much you can afford to spend in retirement on this episode.
Enjoy!
P.S. – We’ll return to our regular podcast production schedule in October!
Thanks to our sponsors!
ZipRecruiter
Unlike other job sites, ZipRecruiter finds qualified candidates for you. Its so effective that 4 out of 5 employers who post on ZipRecruiter get a quality candidate through the site within the first day. Try it for free: go to ziprecruiter.com/afford.
FIGS
FIGS creates high-quality medical apparel so that medical professionals look their best, feel their best, and perform at their best every day. Plus, every time you shop at FIGS, they give scrubs to healthcare providers in need around the world through their Threads for Threads initiative. Interested? Go to wearfigs.com and use code “paula” for 15% off.
Radius Bank
Do you want your money to make more money? Then check out Rewards Checking, from Radius Bank. You earn 1.00% APY on balances of $2,500 and up, there are no fees, and it offers unlimited one percent cash back on debit card purchases. To get started, head over to radiusbank.com/paula.
Blinkist
Busy, but love to read and learn? Blinkist is the only app that takes the best key takeaways from thousands of nonfiction books and condenses them down into just 15 minutes. You can start a free 7-day trial when you join at blinkist.com/paula.
