A CNN reader asks, “I hear I can take only 4% a year from my portfolio. Why can’t I take more?” — Alfred Williamson, White Hall, Md.
Money expert says, “The oft-cited rule is to start by pulling 4% from your savings and then increase the dollar amount of that draw by the inflation rate each year to keep up your purchasing power. (That annual inflation adjustment is why you can’t just withdraw what your investments earn.)
Do that, and you have a good chance that your nest egg will support you for decades.
Real-world complications, though, can wreak havoc with the 4% strategy — just ask anyone who left work on the eve of the 2000 or 2008 bear markets.”