{"id":131357,"date":"2025-09-09T14:06:09","date_gmt":"2025-09-09T14:06:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/131357\/"},"modified":"2025-09-09T14:06:09","modified_gmt":"2025-09-09T14:06:09","slug":"the-rules-of-retirement-are-changing-how-it-can-impact-your-home-and-savings","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/131357\/","title":{"rendered":"The Rules of Retirement Are Changing\u2014 How It Can Impact Your Home and Savings"},"content":{"rendered":"

Conventional wisdom has long held that retirees<\/a> should plan on spending 4% of their savings in the first year of retirement<\/a> and then spending that same amount, adjusted for inflation<\/a>, every year after that. The premise has helped countless people save for retirement, reverse engineering their target savings amount based on the simple premise.<\/p>\n

But the rule no longer stands, says its inventor, Bill Bengen. Instead, he recommends retirees plan on spending 4.7% of their savings in their first year and every year after, adjusted for inflation.<\/p>\n

For homeowners<\/a>, this small tweak can mean big changes in their real-dollar budget, especially for those with a significant amount of their net worth tied up in real estate. And as senior homeowners are increasingly squeezed by property taxes, rising utility bills, and home equity tax if they sell, the added wiggle room in spending could offer meaningful relief for those who have felt trapped by their savings.<\/p>\n

What is the 4% rule, and how did we get here?<\/p>\n

In the early 1990s, Bengen set out to solve a deceptively simple question that had long stumped retirees: How much can I safely spend each year in retirement without running out of money?<\/p>\n

His answer\u2014known as the 4% rule\u2014was first published in the Journal of Financial Planning. It quickly became a retirement planning staple, praised for its clarity: In your first year of retirement, withdraw 4% of your portfolio. Each year after, withdraw the same amount, adjusted for inflation.<\/p>\n

The rule was built on several assumptions: a 30-year retirement with zero-dollar end balance, a portfolio made up of 60% stocks and 40% bonds, and annual rebalancing to maintain that mix.<\/p>\n

But today’s financial reality is testing the limits of those assumptions\u2014especially for homeowners.<\/p>\n

Property taxes have jumped 10.4% over the last three years<\/a>, while home insurance premiums are expected to surge 8% by the end of the year<\/a>. Utility costs in the last year have climbed at almost twice the pace as inflation<\/a>. For retirees living on fixed withdrawals, those increases can be hard to absorb.<\/p>\n

Even downsizing isn\u2019t a guaranteed fix. Selling a home to unlock equity often comes with unexpected costs\u2014especially a hidden home equity tax<\/a> that tends to hit senior homeowners the hardest<\/a>.<\/p>\n

And now, even Bengen himself is revising the rule. With today\u2019s market conditions, he says the foundational math behind the 4% rule may no longer hold.<\/p>\n

The new math: How the 4% rule became the 4.7% rule<\/p>\n

Bengen\u2019s new take allows for a more generous annual pull rate, with more diversity in asset allocation, too. He now recommends a less conservative mix of 55% stocks, 40% bonds, and 5% cash and a universal safemax withdrawal rate of 4.7%.<\/p>\n

He says the change comes from decades of honing his research and his own experience with retirement. After retiring in 2013, he spent an adjusted rate of 4.5% of his savings in the first year. He found this number was too conservative as the stock market has outperformed expectations. He has since boosted his own personal withdrawal rate to 4.9% per year.<\/p>\n

The difference in spend rate can be substantial. Consider the average 401(k) balance at 55 to 64 of about $272,000<\/a>. The old rule would have allowed for an annual budget of just $10,880, but the updated 4.7% rule would boost that to $12,784.<\/p>\n

Some retirees may even be able to withdraw at a rate as high as 7.1%, Bengen says. For these retirees, using the more conservative 4.7% rate could result in a \u201cconsiderable reduction in lifestyle,\u201d he says in his new book.<\/p>\n

That element of lifestyle is a crucial component that is often overlooked, as savers focus on avoiding the daunting prospect of running out of money entirely. And while that\u2019s a worthy goal to plan around, ensuring the highest quality life in retirement is just as important. The new 4.7% rule offers retirees the best of both worlds: a way to avoid running out of funds while ensuring a high quality of life.<\/p>\n

Why this matters to homeowners<\/p>\n

Home equity is often the largest asset that retirees hold. But as inflation outpaces appreciation<\/a> and other overhead costs of homeownership eat into retirees’ fixed-income, the math of owning one can stop making sense. That\u2019s why the updated 4.7% withdrawal rule could be a game-changer for homeowners.<\/p>\n

With more room to safely draw from retirement savings, some may be able to delay tapping their home equity through downsizing, reverse mortgages, or HELOCs. Others might find they can afford to age in place longer, without selling or borrowing against their homes.<\/p>\n

A more generous withdrawal rate gives homeowners more flexibility and (potentially) more time to figure out how to use their home equity, whether it be to fund their retirement or to pass on to their heirs.<\/p>\n

But not everyone can (or should) spend 4.7%<\/p>\n

The updated 4.7% rule may offer more flexibility, but it\u2019s not a one-size-fits-all solution. The median retirement savings for Americans aged 55 to 64 is about $95,000<\/a>. Applying a 4.7% withdrawal rate to that amount yields less than $5,000 a year\u2014barely enough to cover property taxes<\/a> in many parts of the country, let alone other living expenses.<\/p>\n

And even for those with well-funded portfolios, risks like rising health care costs, inflation, and outliving one\u2019s savings still demand a tailored, cautious approach. The 4.7% rule is best viewed as a ceiling\u2014not a starting point\u2014especially for those navigating retirement on tighter margins.<\/p>\n

The risks and realities for today\u2019s retirees<\/p>\n

The 4.7% rule may offer more breathing room than its predecessor, but the biggest lesson may come from the fact that it changed at all.<\/p>\n

Retirement spending isn\u2019t static; it fluctuates with age, health, lifestyle changes, and the condition of the home you live in. The same is true of the everyday costs facing retirees; homeownership, health care, and even the stock market’s performance changes year-to-year. What is sustainable in your early 70s may not hold up a decade later, especially if markets underperform or unexpected costs arise.<\/p>\n

That\u2019s why retirement income planning shouldn\u2019t happen in a vacuum. Housing decisions like where you live, and whether to sell, rent, or stay put must be part of the equation. As should multiple market outcomes. Retirees should run various scenarios: How long will your savings last at a 4.7% withdrawal rate versus 4%? How will that change if home maintenance costs spike or your property tax bill doubles?<\/p>\n

For those relying heavily on home equity to fund retirement, it\u2019s especially important to understand the trade-offs of tapping that equity early versus preserving it for later. In all cases, financial decisions should reflect both the math and the realities of how\u2014and where\u2014you want to live.<\/p>\n","protected":false},"excerpt":{"rendered":"Conventional wisdom has long held that retirees should plan on spending 4% of their savings in the first…\n","protected":false},"author":2,"featured_media":131358,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[71796,45,49,48,133,71797,131,132,7712,12985,49217],"class_list":{"0":"post-131357","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-bill-bengen","9":"tag-business","10":"tag-ca","11":"tag-canada","12":"tag-finance","13":"tag-homeowners","14":"tag-personal-finance","15":"tag-personalfinance","16":"tag-retirement-planning","17":"tag-retirement-savings","18":"tag-withdrawal-rate"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/131357","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=131357"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/131357\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/131358"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=131357"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=131357"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=131357"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}