Practical analysis for investment professionals
28 March 2013

Poll: Is the 4% Rule of Withdrawal Rates Still Valid?

In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked readers whether the “4% rule” — which holds that an initial withdrawal rate of 4% of the value of the typical portfolio at retirement should be sustainable over 30 years (adjusted annually for inflation) — is still valid.


Poll: Is the “4% rule” — which holds that an initial withdrawal rate of 4% of the value of the typical portfolio at retirement should be sustainable over 30 years (adjusted annually for inflation) — still valid?

Poll: Is the "4% rule" — which holds that an initial withdrawal rate of 4% of the value of the typical portfolio at retirement should be sustainable over 30 years (adjusted annually for inflation) — still valid?



When it comes to retirement planning, the key question is how much the client can safely spend out of his or her portfolio during the golden years. The rule of thumb is that 4% is a safe withdrawal rate. However, given that many bond yields are well below 4% — and retirees tend to invest heavily in bonds — the appropriateness of this rule has been called into question.

Earlier this week, we asked professional investors in the U.S. if the “4% rule” was still valid. A majority (more than 57%) of the 984 respondents said no. This is not altogether surprising, given where interest rates are and the fact that many Baby Boomers fear running out of money. In the United States, Morningstar recently weighed in on this issue, as have a number of investment bloggers. At the CFA Institute Wealth Management 2013 conference, Michael E. Kitces discussed whether safe withdrawal rates are still relevant in today’s low-return environment.


Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
Lauren Foster

Lauren Foster is managing editor of Enterprising Investor and co-lead of CFA Institute’s Women in Investment Management initiative. Previously, she worked as a freelance writer for Barron’s and the Financial Times. Prior to her freelance work, Foster spent nearly a decade on staff at the FT as a reporter and editor based in the New York bureau. Foster holds a BA in political science from the University of Cape Town, and an MS in journalism from Columbia University.

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