Record-level inflation has led to financial planner Bill Bengen suggesting that retirees may consider reductions to their spending under today’s market conditions.
Bill Bengen, who invented the “4% rule” for retirees in 1994, suggested that current retirees may want to reevaluate their spending habits in the face of 8.5% inflation and soaring stock and bond market valuations, according to the Wall Street Journal. The “4% rule” allowed for retirees to spend 4% in the first year of their retirement then adjusting for inflation each following year, the outlet reported. Since 1926, the “4% rule” would enable retirees to spend over a 30-year period without running out of money.
.@annetergesen talks to Bill Bengen, the inventor of the 4% rule, on inflation and those navigating retirement right now.https://t.co/Exa7dxIObq
— Bourree Lam (@bourreelam) April 19, 2022
“The problem is that there’s no precedent for today’s conditions,” Bengen told the Wall Street Journal. Bengen reportedly stated that the “4% rule” also has not always been 4%, with a 2006 revision of the portfolio increasing the safe spending amount to 4.7%. However, as inflation increases, Bengen advised new retirees to consider spending around 4.4%. (RELATED: Economists Increasingly Think US In On The Edge Of A Recession)
“I retired nine years ago, so I’m probably safe,” Bengen, who retired in 2013, said, according to the Wall Street Journal. “But I’m not comfortable because I am still early enough in retirement that the combination of threats we face could be damaging.”
Bengen’s remarks come amidst a surge in gas prices, as well as an increase in the Consumer-Price Index (CPI). In a statement, Democratic West Virginia Sen. Joe Manchin described the current inflation as “out of control” and demanded to know “when will this end?”