If No One Follows the 4% Rule, What IS the Right Withdrawal Rate?

BiggerPockets Money Podcast

BiggerPockets

Investing, Education, Business

4.6 • 2.9K Ratings

🗓️ 23 May 2025

⏱️ 60 minutes

🔗️ Recording | iTunes | RSS

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Summary

Most people assume the “safe withdrawal rate” for retirement (or early retirement) is 4%. But, if that’s the case, why is it SO hard to find anyone who’s gotten to their FIRE number, quit their job, and lived entirely off of the 4% rule? If the 4% rule is so safe and backed by solid math, why are so few FIRE followers confident enough to actually use it? We don’t know. So we asked Karsten, AKA “Big Ern,” from Early Retirement Now to help answer! Karsten has done the math, and the 4% rule checks out. But even he, an early retiree, doesn’t follow it. So, instead of the safe withdrawal rate, what’s the comfortable withdrawal rate early retirees should be following to FIRE on time and with less stress? And with turbulence in today’s stock market, and rising prices (which cause your spending to rise), what does the right FIRE portfolio look like? Karsten walks through how your portfolio should change as you approach FIRE. He explains why hedging with cash-flowing assets may be a smart move, how much cash to keep on hand, and whether those reserves can actually protect against sequence risk. Plus, should you pay off your mortgage on the path to FIRE? Scott and Karsten offer two different perspectives on whether it’s smarter to pay off your mortgage or invest that money instead. If you’re planning to FIRE, this is info you need to know! In This Episode We Cover Is the 4% rule math or myth, and why doesn’t anyone actually trust it enough to use it? The optimal FIRE portfolio for less risk and higher potential returns Cash reserves and emergency “buckets” to limit your sequence of returns risk Should you pay off your mortgage early or invest that money instead? One smart hedge to protect your portfolio against a stock market downturn And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/money-643 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠⁠[email protected] Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Is your retirement plan built on financial quicksand?
0:02.8	With inflation surges, market volatility, and economic uncertainty dominating headlines,
0:08.4	the traditional 4% rule for retirement withdrawals may be more myth than math.
0:13.2	Today, we're cutting through the confusion with a deep dive into what withdrawal rates
0:17.2	are actually safe in today's economy.
0:24.3	Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen,
0:28.6	and with me as always is my mathematics enthusiast, Scott Trench.
0:33.0	Thanks, Mindy. Great to get into another conversation with you and all the derivatives.
0:38.4	Today here with Big Earn. Bigger Pockets is a goal of creating one million millionaires. You're in the right place
0:41.7	if you want to get your financial house in order because we truly believe financial freedom is
0:45.3	attainable for everyone, no matter when or where you're starting. We are so excited to be joined
0:50.6	today by Karsten Yesker, or Big Earn, an expert on safe withdrawal rates.
0:55.0	Would you mind just quickly introducing yourself and your body of work to those who need more
0:59.3	of an introduction to you here in the Bigger Pockets Money community?
1:01.9	Yeah, thanks for having me on the show. It's a big honor to be here. And yeah, so I wrote a lot
1:07.6	about safe withdrawal rates because I was planning to retire and I wanted to do
1:14.4	the hard work and see how to do it right and how to do the math right because I'm a very math
1:20.1	oriented and math influenced person and so doing the math right gave me the confidence to
1:26.6	to finally pull the plug in 2018.
1:30.0	And so, yeah, a lot of work on my blog is centered around the Safe Withdrawal rate series.
1:36.3	But I write about some other stuff, too, about economics, about options trading, about general fire and personal finance stuff too awesome well i look forward to getting
1:46.1	into a wide range of subjects here with you um but i think one of your one of your kind of taglines or
	...

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