Time to Replace the 4% Rule

Retirement-Savings Withdrawal Strategy Is Flawed, but Replacement Is Complex

How much -- when the time comes -- should you withdraw from your accounts earmarked for retirement? Answer that question correctly and you get to enjoy the retirement of your dreams. Answer it incorrectly and you either outlive your assets or you leave more money to your heirs than planned.

Conventional wisdom suggests that you withdraw on average 4% adjusted for inflation. Now comes a paper co-authored by William Sharpe, the winner of the 1990 Nobel Prize in Economics, challenging the conventional wisdom.

"It is time to replace the 4% rule with approaches better grounded in fundamental economic analysis," wrote Sharpe in his paper "The 4% Rule -- At What Price?" (That paper appeared in The Journal of Investment Management in 2009, but resurfaced last week in the financial-adviser community and is sparking debate anew.)...

Yahoo! Finance: Time to Replace the 4% Rule