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Sound Financial Group - Bothell, Washington


SFB025 The Fallacy of the 4%

| July 19, 2016
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Episode Summary

Paul Adams joins us again on this episode to discuss why you should only take out a max of 4% on your portfolio each year and why there is a huge fallacy in the 4% equation that people often miss. Are you getting ready to retire or looking to retire early? Then this is a podcast episode you do not want to miss out on. Paul helps you understand the fundamentals of how much money you need to safely live off of your investments.

What Was Covered

  • 01:25 - The podcast episode is going to be short, sweet, and filled with some great data.
  • 02:25 - If you like this podcast, text it to 7-8 friends. Why? Paul explains.
  • 03:15 - Let's talk about 'the fallacy of the 4%'.
  • 04:45 - Can you replace the work you're doing now and get your financial capital to do the work for you?
  • 05:00 - You can distribute/take out a max of 4% of your portfolio per year.
  • 05:50 - If my portfolio will average 8% a year, why can't I take out 8%? Because markets change.
  • 06:30 - You need a million in assets if you wish to live off $40,000 a year.
  • 06:45 - Want to live off $200,000 a year? You need 5 million in your portfolio.
  • 07:15 - Where's the fallacy? It's 4% if you never wish to invade principle on that money.
  • 08:00 - If you have money in a mutual fund, beware that money is being taxed.
  • 10:15 - Paul discusses the benefits of using a linear asset pay down strategy.
  • 12:00 - Paul presents a new way you can think about reverse mortgage.
  • 12:35 - What is a charitable unity?
  • 15:00 - It may sound controversial, but there are some great benefits to whole life insurance.
  • 16:35 - Understand the math behind whole life insurance before you sign on with a financial advisor.
  • 16:45 - Your financial decision shouldn't be based on opinions, it should be based on pure math.
  • 18:25 - You want to always have financial backups in place so you can enjoy your money for longer.


"The reason why we work is so that one day we don't have to work."

"Are you doing the things necessary to create the capital-base required?"

"If you make a large charity contribution, you can actually get a unitization from the charity."

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