Planning for Large Costs in Retirement | Beyond the 4% Rule
- Planning for Large Costs in Retirement | Beyond the 4% Rule James Conole, CFP® 22:42
Listener Sherry asks a good question: How do large, one-off expenses (like a new roof, new car, etc.) fit in the 4% Rule?
James explains the concept of the 4% Rule and its limitations while demonstrating how it can be an effective guideline in planning and forecasting retirement success.
He addresses the importance of anticipating one-off expenses and, depending on your portfolio withdrawal rate, using sinking funds to get a reality check on where you stand.
Questions answered:
Are one-off expenses covered in the 4% Rule?
Who should be concerned with creating sinking funds for one-off expenses?
Timestamps:
0:00 – Sherry’s question
3:19 – Shortcomings of the 4% Rule
5:30 – Look at income and outcome
6:58 – Portfolio withdrawal rate
10:51 – Example of no margin
13:02 – Sinking funds
16:57 – New reality check
18:49 – Consider the duration of expenses
20:17 – The wrap-up
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