5 Years of Spending in Retirement

Oct. 3, 2024 - A Wealth of Common Sense

There are a few things I like about this retirement strategy:You’re approaching it through the lens of spending. For instance, if you have a 60/40 portfolio and are spending 4% of your portfolio each year, you have 10 year’s worth of current spending in fixed income.

Several years ago one of my readers sent me a detailed version of what he called the 4 Year Rule for retirement spending and planning:1. Five years before retiring start to accumulate a cash reserve (money market funds, CDs) within your retirement plan if possible (to defer taxes on interest).

When you retire, your portfolio should consist of your four year cash reserve plus stock mutual funds allocated appropriately...