The fundamental purpose of the 4% rule is to determine an appropriate spending floor for older investors that is low enough to survive the worst return sequences that can be found in the historical data. If market returns going forward turn out to be as bad as the Great Depression or the stagflation of the 1970s, the portfolio is still expected to sustain inflation-adjusted spending to the end of a 30-year time horizon. If returns are better, there will simply be “extra” money left over.

Yet the reality is that in most historical scenarios, returns are not so bad as to necessitate an initial withdrawal rate of only 4%.

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