Wade Pfau: Pandemic Tears Up 4% Rule
April 15, 2020 by Jane Wollman Rusoff
In the good old days (before coronavirus), many people could rely on working longer to wrangle a wayward retirement plan back on track. Not anymore. The devastating loss of jobs set off by the COVID-19 pandemic is depriving many folks who planned to retire this year of that lever, as retirement expert Professor Wade Pfau tells ThinkAdvisor in an interview.
Another crushing change: The 4% rule of thumb for income withdrawal in retirement has shriveled to only 2.4% for investors taking “a moderate amount of risk,” according to Pfau’s latest calculations.
The multi-award-winning retirement authority is professor of retirement income and co-director of The New York Life Center for Retirement Income at The American College of Financial Services. Host of the blog Retirement Researcher, the chartered financial analyst holds a doctorate in economics from Princeton University.
In the interview, Pfau stresses that investors typically fall into the “trap” of depending on investment portfolios as the chief way to fund their retirement. Now, many of these folks who are at retirement find themselves needing a life raft.
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