22 Feb I want to retire. Should I use the 4% rule?

Q. I am 55 and I would like to retire as soon as possible. I have $1.2 million in IRAs and 401(k)s and I know I can’t take Social Security yet. I’ve heard that you can calculate what to take from retirement accounts without running out of money by taking out 4% a year. Is that true?
— Investor

A. We’re glad to hear you’re planning for your retirement.

And we hope you can afford to do it as soon as you’d like.

The so-called 4% rule has been a rule of thumb for many, but there are variables to consider.

Rather than stick to the 4% rule, you should review your specific financial plan, said James Suazo, a chartered financial consultant with Baron Financial Group in Fair Lawn.

As yourself: What is your current lifestyle? Do you plan to maintain the same lifestyle in retirement? What are your retirement goals?

“The 4% withdrawal theory uses a specific portfolio strategy of half stocks and half bonds which may not match your tolerance for risk,” Suazo said. “It also plans for 30 years of withdrawals. If you are planning for a longer period, this may not be a good place to start. Keep in mind we always recommend planning into your 90s.”

If you don’t have an overall financial plan, you should meet with a fiduciary who can review the specifics of your situation, your resources and your goals.

It’s a worthwhile investment.

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This story was originally published on Feb. 22, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.