3% Retirement Withdrawal Rule

A discussion about sustainable retirement planning and the traditional 4% rule versus a more conservative 3-3.5% withdrawal approach for maintaining long-term wealth.

Core Retirement Planning Numbers

• Traditional 4% rule is considered too aggressive
• Conservative 3-3.5% withdrawal rate recommended
• Example calculation:
  • $5M invested with 3% withdrawal = $150k annual living expenses
  • Principal remains untouched due to investment returns and inflation adjustments

Wealth Thresholds for Financial Independence

• Early misconceptions:

  • Age 25: Believed $1M was enough
  • Reality proved this insufficient

• Mature perspective (30s):

  • $5-10M considered optimal range for most people
  • Varies based on:
    • Location of residence
    • Lifestyle choices
    • Personal spending habits

• Wealth observations:

  • $10M+ considered excess wealth
  • Life changes plateau between $5-10M
  • Amount needed to weather major market downturns

Key Retirement Planning Principles

• Focus on sustainable withdrawal rates
• Account for:
  • Stock market fluctuations
  • Bond performance
  • Inflation impact
• Goal: Never touch principal investment
• Prioritize long-term financial security over maximum returns