Forget the 4% Rule. Here's What Dave Ramsey Says You Should Do With Your Retirement Savings

"A lot of people think saving money for retirement is the hard part. Some actual retirees might tell you that's the easy part. The hard part, rather, comes when it's time to start withdrawing from your savings. You don't want your money to run out prematurely, but you also don't want to deny yourself income you could use to enjoy your life."

"For many years, financial experts were quick to recommend the 4% rule for managing a retirement nest egg. The rules goes like this: Withdraw 4% of your savings balance in your first year of retirement. Adjust withdrawals each year after for inflation as needed. It's that simple. Experts believe that following the 4% rule gives your savings a good chance of lasting for 30 years."

Many people believe saving for retirement is hardest, but retirees often find withdrawals more difficult. Withdrawals require balancing the risk of depleting savings against enjoying income now. The 4% rule advises withdrawing 4% of savings in the first year and then adjusting for inflation, and gives a reasonable chance of lasting 30 years. The 4% rule may leave retirees with limited income; for example, a $1 million nest egg yields only $40,000 annually before inflation adjustments. Social Security can supplement savings, but following 4% can still restrict near-term spending. Dave Ramsey rejects the 4% rule and proposes an alternative strategy tied to a specific investment approach.

Read at 24/7 Wall St.