A new report from Morningstar raises fresh questions on whether the 4 percent rule for retirement withdrawals can still hold for today's investors.
In its 2024 State of Retirement Income study, which gamed out how a variety of investment, income, and spending strategies might work out for a US investor in retirement, Morningstar Retirement estimated retirees drawing solely from investment portfolios could safely start withdrawing from their nest eggs at a 3.7 percent withdrawal rate.
That number, which Morningstar's model predicted would result in a 90 percent probability of funds lasting through a 30-year retirement, represents a modest reduction from the 4 percent it calculated in 2023.
"The decrease in the withdrawal percentage compared with 2023 owes largely to higher equity valuations and lower fixed-income yields, which result in lower return assumptions for stocks, bonds, and cash over the next 30 years,” the report noted.
The highest safe starting withdrawal rates, Morningstar emphasized, applies to portfolios with equity allocations between 20 percent and 50 percent, assuming a 30-year spending horizon. But while that conservative asset exposure minimizes the likelihood of failure – defined as when a retiree outlasts their savings – that also leads to lower median balances at the end of the period compared to portfolios with higher equity exposure.
The study also did other simulations based on actual spending trends among retirees, noting that inflation-adjusted spending often decreases over time. Based on that dynamic spending, Morningstar estimated that retirees could get away with a higher withdrawal rate of 4.8 percent, with a 90 percent probability of success over a 30-year timeline.
But the most secure approach, Morningstar suggested, incorporates a blend of different retirement income sources. That means aside from their investment portfolios, retirees should look at how they claim Social Security benefits and possibly add annuities to the mix.
“Retirees seeking the highest level of lifetime income should consider a combination of delayed Social Security filing and a flexible withdrawal strategy such as the guardrails approach,” the report said. "While cash flows from the guardrails strategy look volatile on a stand-alone basis, the addition of Social Security income adds valuable stability."
For retirees with above-average life expectancies, it said delaying Social Security can offer significant advantages, particularly if they have nonportfolio income such as rental income or part-time work to pick up the slack in their early retirement years.
“It’s time for an economic reset,” wrote the California governor, in a post on X.
Masterworks was launched in 2017 but its RIA, Masterworks Advisers, is just three years old.
One 2017 form, no broker license, and a $42 million gap they say surfaced on a webinar.
Fewer than half of Americans in their peak earning years feel on track for retirement, while many say limited financial knowledge and access to professional guidance are holding them back.
Meanwhile, Wells Fargo hauled advisors overseeing $825 million in the West Coast, while Wedbush has welcomed a seasoned professional from Stifel in California.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
