A New Take On The 4% Rule - Seeking Alpha: For about a year, I have been fascinated by the symmetry of dividend growth investing's typical 4 percent current yield with the familiar retirement strategy of withdrawing 4 percent of your assets in Year 1 of retirement.
They are the same number! In other words, if you have saved $X for retirement, then withdrawing 4 percent of it in Year 1 produces the same amount of "income" as a 4 percent yield. If you've saved $1,000,000, then a 4 percent withdrawal is $40,000. If your assets consist of income generators, a 4 percent current yield (which is typical) also generates $40,000. The equality of amounts holds true no matter how much X is.
They are the same number! In other words, if you have saved $X for retirement, then withdrawing 4 percent of it in Year 1 produces the same amount of "income" as a 4 percent yield. If you've saved $1,000,000, then a 4 percent withdrawal is $40,000. If your assets consist of income generators, a 4 percent current yield (which is typical) also generates $40,000. The equality of amounts holds true no matter how much X is.
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