The 4% rules still works in a 6.5% return and 2% inflation world. That's is the return on a 60/40 portfolio assuming Blackrock's and Vanguard's expected returns for the next decade. The key is to remain invested through business cylcles with appropriate exposure to the various asset classes, rebalancing etc, but mostly to stay invested.
sequence of those returns is what matters not the average of the returns .
the order that average comes in at determines if you survive or not .
there can be as much as a 15 year difference in how long the money lasts just taking the same average and playing with the sequence that average comes in .
moishe milevsky in his now famous article retirement ruin and the sequence of returns demonstrated how average returns mean nothing and showed how the money ran out 15 years sooner or later with the same draw and same average return .
these simple reverse amortization calculators many folks use to determine how much they can draw are awful .
amortization calculators never have you spending down in a down year. every year is subject to the same positive average return and negative real return years don't exist . .
the 17-year period (1987-2003), the S&P 500's average return was 13.47%. It doesn't make any difference if we look at the returns from 1987 to 2003 or from 2003 to 1987.
But when taking withdrawals, the sequence of returns makes all the difference. The same initial capital, the same withdrawal amount, the same returns - but a different sequence produces dramatically different results.
if we leave the rate of inflation growth with the principal and spend everything else .
For a $100,000 portfolio adjusted for inflation over those 17 years, the difference is a remaining balance of $76,629 to a deficit of $187,606. depending on the order those gains and losses came in .
never ever use a calculator that simply asks you to fill in a projected average return and inflation rate .