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It all starts right here on Ready for Retirement. for retirement.

Hi, everyone, and welcome back to another episode of Ready for Retirement.

I'm your host, James Knoll.

And today's episode is all about the 4% rule and specifically how you can apply the 4% rule or even do something better than the 4%

rule when it comes to your portfolio. Now, there's two listener questions that both hit upon a

slightly different aspect of this question, but they're ultimately asking the same thing.

So the first question is this. This comes from Richard. Richard says is the 4% rule based on an initial retirement

portfolio value when one begins retirement, and then that dollar amount is set and adjusted

for inflation in subsequent years? Or is the 4% based upon the portfolio value each year?

Example, is it based upon the value of the end of that year, so on and so forth?

If the 4% was based upon the value of the portfolio as it changes each year, would that

lead to a better chance of not outliving one's money?

So that is the first question.

That comes from Richard.

And so just an example to illustrate what Richard's asking is he's saying this.

He's saying, look, let's assume I have a million dollars, year one of retirement.

Well, pretty straightforward with the 4% rule calls for year one. You take 4% of a million or

$40,000 and that's pretty simple, your first year. But then what do you do the second year? Do you

increase that $40,000 by inflation? Or do you take a look at the portfolio value at the beginning

of year two of retirement and take 4% of that? So, for example, if the portfolio increased from

...