Some Retirement Experts Swear by the 4% Rule. Here's Why I'm Against It

Saving for retirement is something that sometimes bums me out. Yes, I know that's a weird thing to say, but it's true.

Don't get me wrong. It's satisfying to watch my 401(k) plan balance grow. And I know I have to save for retirement if I want to be able to cover my costs, since Social Security won't be enough.

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But the money I set aside for retirement savings is money that could do a lot of other big things for me -- pay for a bigger house, buy me a nicer car than my 12-year-old minivan, or afford me the opportunity to outsource parts of my life I find way too time-consuming and annoying. (Hello, laundry. I'm talking to you.)

Still, I try not to complain too much about building retirement savings and power through. But I also know that because I'm working hard to build a retirement nest egg, I want that money to last.

To that end, it's important to have a smart withdrawal strategy. And many experts will probably insist that the 4% rule is a good one to follow.

The 4% rule has you withdrawing 4% of your nest egg your first year of retirement and adjusting future withdrawals for inflation. Based on historical market data, it's supposed to set your savings up to last for 30 years.

I think the 4% rule is a good starting point for coming up with a withdrawal strategy. But I'm against using it for a number of reasons.

Some problems with the 4% rule savers should know about

One of my biggest issues with the 4% rule is that it assumes you want or need your savings to last for 30 years. But some people retire early, either because they want to or they have to. Others may retire at a later age than average.

I'm actually hoping to be in the latter category, since I love what I do and tend to get bored easily. But in that case, I find it silly to follow a rule that makes assumptions about your retirement age that may be way off base.

The 4% rule also assumes that you're maintaining a portfolio that's pretty evenly split between stocks and bonds. To be fair, as of now, this aligns with how I would expect to invest my money.

But I also don't know what bond yields are going to look like in the future. If they're unbearably low, I may have to change my strategy -- say, by going heavier on stocks but stockpiling some extra cash as a guardrail. A notably different asset allocation, though, could render the 4% rule less effective.

Finally, I need a lot more flexibility with retirement spending. If my health is good enough, I may want to do more travel certain years. If I decide to continue owning a home and it needs repairs or improvements to make it more comfortable, I want the option to take larger withdrawals for a limited period of time and then adjust my spending downward.

The 4% rule doesn't necessarily allow for that level of flexible spending. That's a problem for me. After working so hard to build savings, I don't want to feel that I don't have options.

You don't have to follow the 4% rule

You might read that not sticking to the 4% rule could put you at risk of running out of savings, in cases where you go above that rate. But you should know that there's more to the story than that, and that ignoring the 4% rule does not mean you're doomed to deplete your IRA or 401(k).

A better approach -- in my book, anyway -- is to use the 4% rule as a starting point but adjust your withdrawal strategy based on your retirement age, spending needs, goals, asset allocation, and the market's performance. Taking a personalized approach could make it easier to enjoy your savings to the fullest without having to constantly stress about running out.

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