The traditional 4% retirement withdrawal rule may not be the best strategy for maximizing lifetime retirement income, according to research published Wednesday by American Enterprise Institute senior fellow Mark Warshawsky and independent researcher Gaobo Pang.
The study found that combining partial annuitization, where retirees convert part of their savings into a guaranteed income stream while leaving the rest invested, with delaying Social Security generally produced better retirement outcomes than relying solely on the long-standing withdrawal strategy.
The researchers evaluated four retirement income strategies for a hypothetical 65-year-old with $1 million in retirement savings and about $25,700 in annual Social Security benefits.
The analysis factored in taxes, Medicare premiums, investment returns and Social Security claiming decisions before concluding that a mix of guaranteed annuity income and invested assets offered the best balance between income security, flexibility and long-term growth.
The Sweet Spot "There's significant risk there in terms of outliving your assets," Warshawsky said of the 4% rule.
