The 4% Rule Won't Work for My 401(k). Here's How I Plan to Manage My Retirement Savings Instead.

I'm working extremely hard to build up savings for retirement. I know that I can't plan to cover my bills on Social Security alone. And I also know that I don't want to have to worry about money in retirement.

I spent enough time in my 20s stressing over managing my expenses while paying off student loans. And I spent enough of my 30s worrying about home repairs while juggling child care costs and a mortgage. Come retirement, I want money to be the last thing I worry about, which is why I'm willing to make sacrifices now to fund my 401(k).

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Of course, I don't want to put in all of this hard work just to blow through my savings in retirement and end up short. I recognize that it's important to manage my nest egg wisely once I'm ready to use it.

To that end, a lot of financial experts will suggest following the 4% rule. The 4% rule tells you to withdraw 4% of your nest egg during your first year of retirement and adjust future withdrawals for inflation. If you stick to it, there's a good chance your savings will last for 30 years.

I'm not going to come out and say that the 4% rule is a bad choice for everyone. But it won't work for me for one big reason.

When you need flexibility

Since I don't have a crystal ball, I can't predict what my 401(k) balance will be come retirement. But I'm hoping it's enough to cover my expenses so I don't have to rely on Social Security for essential bills. I'd rather be able to look at those benefits as extra money I can use for leisure.

But whether I retire with $400,000, $1 million, or more, I want to make sure my 401(k) doesn't run out on me. So I intend to manage my withdrawals carefully. At the same time, though, I don't think I'll use the 4% rule for one big reason -- it doesn't offer me the flexibility I want.

While the 4% rule has you adjusting withdrawals for inflation, it doesn't have you adjusting withdrawals based on needs and wants. And that doesn't work for me.

I need a withdrawal strategy that allows me to tap my 401(k) to a larger degree some years for things like travel or home repairs. Or, I may want to make the occasional large purchase, like new furniture or a new car.

It stands to reason that if there's a year when my only travel is a series of local camping trips and another year has me taking three trips overseas, that second year might be a more expensive one. I want the flexibility to do something like that without feeling guilty because I may be going beyond the 4% mark.

A starting point, but nothing more

If you feel the 4% rule works for you, you should use it. Otherwise, you may want to do what I plan to do -- figure out an initial withdrawal rate for your first year of retirement, and then adjust future withdrawals based on needs and wants rather than inflation.

Now at this point, I couldn't tell you what my initial withdrawal rate will be. I may decide to take out 5%, or start with 2% or 3% if my expenses aren't that high. I also intend to consult a financial advisor to help me land on an initial withdrawal rate that allows me to do the things I want without going overboard.

Many people have success with the 4% rule. But it never hurts to look at other options, even if you generally think it's sound financial advice.

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