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New retirees could kick off their golden years with a familiar number, 4%.

A trio of Morningstar researchers analyzed starting safe withdrawal rates from an investment portfolio to fund

retirement. The future looks good and a little flexibility could make it even better. John Reckenthaler

and his co-authors ran in numbers. The Vice President of Research for Morningstar Research Services

is here to discuss what they found. Thanks for being here, John.

Yes, indeed.

So the big headline number from the latest report is 4%.

Initial withdrawal rate.

Talk about why that number matters so much.

Well, first, I'd like to talk about the irony of this,

because 4% historically has been kind of the rule of thumb

that people have used when thinking about how much money can I spend from my retirement portfolio.

That 4% number assumes it's 4% of your starting portfolio, say you have a $500,000 portfolio, so 4% of that is $20,000,

and you would spend that in year one. The next year, you would spend the same amount

adjusted by inflation. So like, as with Social Security, it would go up by the rate of inflation.

So $20,000, and if inflation is whatever, then it goes up to $21,000, say,

then 22. So you're keeping the same purchasing power. And 4% is based on some research from 30 years

back, a fellow named Bill Bingen did some work and said this historically has always been a safe

number. so that's

what I recommend. Now, we did all this 70-page, you know, thousands of simulation, 70-page paper,

and in this year's edition, we exactly ended up matching the rule of thumb number. So in a sense,

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