Planning for Large Costs in Retirement | Beyond the 4% Rule

Listener Sherry asks a good question: How do large, one-off expenses (like a new roof, new car, etc.) fit in the 4% Rule?

James explains the concept of the 4% Rule and its limitations while demonstrating how it can be an effective guideline in planning and forecasting retirement success.

He addresses the importance of anticipating one-off expenses and, depending on your portfolio withdrawal rate, using sinking funds to get a reality check on where you stand.


Questions answered:
Are one-off expenses covered in the 4% Rule?

Who should be concerned with creating sinking funds for one-off expenses?

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⏱Timestamps:⏱
0:00 - Sherry’s question
3:19 - Shortcomings of the 4% Rule
5:30 - Look at income and outcome
6:58 - Portfolio withdrawal rate
10:51 - Example of no margin
13:02 - Sinking funds
16:57 - New reality check
18:49 - Consider the duration of expenses
20:17 - The wrap-up

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