Podcast Summary – Ask The Compound

Episode: Does the 4% Rule Still Work?
Date: January 28, 2026
Hosts: Ben Carlson (A), Duncan Hill (B)

Episode Overview

This episode centers on listener-submitted questions about investing, diversification, and retirement planning, with a highlight on the enduring viability of the "4% rule" for retirement withdrawals. Ben Carlson and Duncan Hill tackle topics like international diversification, emerging markets, the pros and cons of concentrating wealth in tax-advantaged accounts, real estate decision-making, and the flexibility needed with retirement withdrawal strategies.

Key Discussion Points & Insights

1. Is Diversification Finally Paying Off Again?

• Discussion: The hosts reflect on US stock outperformance shifting in the last 15 months, as international, emerging markets, and other asset classes have surged in comparison to the S&P 500.
• Insights:
  • 2025 saw emerging markets and developed international stocks up 30%, outpacing US large caps (+18%) ([03:38]).
  • Diversification is valuable because the future is unpredictable: "The only reason diversification works, quote unquote, is because you don’t have to determine the winners in advance." – Ben ([05:30]).
  • Trends such as a falling US dollar and declining rates support non-US assets and smaller companies ([04:40]).
• Memorable Quote:

  "If you knew what was going to happen, you don’t diversify in the first place. You just put all your money in the thing that’s going to outperform." – Ben ([05:19])

• Takeaway: It’s not too late to diversify. “Asset allocation is for long-term people, it’s for patient people.” – Ben ([06:38])

Timestamps:

• [02:27] – Listener question: Should I diversify now?
• [03:38] – Review of 2025/2026 asset class returns
• [05:30] – The core reason for diversification

2. Downsides of Over-Concentrating in Tax-Deferred Retirement Accounts

• Discussion: A younger couple asks whether to continue maximizing retirement accounts or shift some savings to taxable brokerage accounts for flexibility.
• Insights:
  • Too much focus on tax-deferred accounts sacrifices flexibility (e.g., for loans, large purchases, or emergencies).
  • Ben is “coming around” to Nick Magguilli’s view that maxing out every tax-advantaged vehicle might not be optimal for everyone ([08:13]).
  • Diversifying account types provides options; taxable accounts allow for borrowing and easier access ([09:14]).
• Memorable Quote:

  "Having that taxable account actually helps you a lot in ways you might not think from that flexibility." – Ben ([09:32])

Timestamps:

• [07:53] – Listener dilemma on tax-advantaged vs taxable savings
• [09:14] – Ben’s evolving perspective

3. Investing in Emerging Markets: Boom, Bust, and the Patience Factor

• Discussion: Why have emerging markets underperformed, and is there a case for sticking with them?
• Insights:
  • Similar to US/international cycles, EMs move in long, volatile boom-bust cycles ([11:02]).
  • From 2010-2023, EMs returned 3%/yr (flat vs. expectations), but the cycle prior delivered 400%+ while the US lagged ([11:54]).
  • There’s no way to time these cycles; diversification cushions prolonged underperformance ([13:11]).
• Memorable Quote:

  "It’s a boom-bust cycle...if you invest in an asset like this, you’re going to deal with those periods of underperformance." – Ben ([12:18])

• Side note: Definitions of “emerging market” shift between index providers ([13:18]).

Timestamps:

• [10:13] – Why EM ETFs have lagged
• [11:54] – A historical look at EM vs. US stocks
• [12:18] – Boom-bust cycle explained

4. Real Estate: Rent or Sell When Upgrading Your Home?

• Discussion: Listener debates whether to roll equity into a new house or keep the old house as a rental (motivated by a low 3.5% mortgage).
• Insights:
  • Keeping the old home concentrates risk in real estate and may necessitate drawing down brokerage accounts—a potential "nest egg hit" ([17:02]).
  • Being a landlord is a significant commitment; “You can’t half-ass being a real estate investor.” – Ben ([17:32]).
  • The allure of low fixed-rate debt is real, but the overall risk and opportunity cost may outweigh holding both properties ([18:14]).
• Memorable Quote:

  "It just seems like a lot of work to be a landlord...You can’t just say, I’ll just rent it out, it’ll be fine." – Ben ([17:32])

Timestamps:

• [13:56] – Listener scenario and numbers
• [17:02] – The risk/tradeoff breakdown
• [18:14] – Opportunity cost discussion

5. The 4% Rule for Retirement Withdrawals – Does It Still Work?

• Discussion: Is it better to stick to the 4% rule, or adopt a more flexible, percentage-based withdrawal adapted to portfolio size?
• Insights:
  • The original 4% rule is intentionally conservative, designed to protect against worst-case market or inflation scenarios ([20:19]).
  • In most normal conditions, it results in spending less and leaving a large portfolio behind.
  • Alternative: Combine a base, stable income bucket (e.g., TIPS ladder) with a variable stock-based withdrawal.
  • Flexibility is crucial. "You have to be kind of flexible with this. Depending on what the environment is, what you’re retiring into, the timing of bear markets...you have to be flexible." – Ben ([22:26])
  • Most retirees, with or without advisors, will likely need to adapt plans based on personal spending, inflation, and market conditions.
• Memorable Quotes:

  "I don’t know that anyone actually does the actual 4% rule and follows it to a T. I think you have to be kind of flexible with this." – Ben ([22:26])
  "That’s the secret about financial planning—no one wants to admit there’s a lot of guessing that goes on." – Ben ([24:47])

Timestamps:

• [18:57] – Listener scenario on withdrawal strategies
• [20:19] – 4% rule context and purpose
• [21:37] – Hybrid/bucket and variable strategies explained
• [22:26] – Need for flexibility emphasized
• [23:42] – Personal vs. CPI inflation question

Notable Quotes & Moments

• "You give up on the home runs, but you also avoid striking out. Right? Clip those singles and doubles." – Ben ([05:46])
• "Having the taxable account actually makes a lot of sense...[for] the flexibility." – Ben ([09:32])
• "You can’t half-ass being a real estate investor." – Ben ([17:32])
• "I think you need to be flexible and make changes occasionally." – Ben ([23:31])
• "No one ever believes the CPI number, but also no one ever knows what their personal inflation rate is either." – Ben ([24:28])

Additional Memorable Moments

• Jokes about Ben’s “Freddy Krueger” striped sweater and listeners trying to guess its brand ([02:52]).
• Duncan’s incredulity at $6,000 rent in Chicago ([15:35], [17:03]).
• Touches on Disney trip inflation and personal finance’s “spreadsheet warriors” ([25:10]).

Episode Structure/Flow

0:00 – Show kickoff and introduction
2:27 – Diversification and international stock comeback
7:02 – Question on over-concentrating in tax-advantaged retirement
10:13 – Five years of flat emerging markets: what to do?
13:56 – Should I rent or roll my old home when upgrading?
18:57 – Revisiting the 4% retirement withdrawal rule
End – Casual wrap, teasers for next week on taxes/Roth IRAs

Final Takeaways

• While diversification can seem disappointing during US stock booms, it inevitably cycles back into favor; it’s never too late to spread risk.
• Strict adherence to maxing tax-advantaged accounts or traditional withdrawal rules may sacrifice valuable flexibility.
• Real estate decisions should be grounded in a sober understanding of risk, experience, and the true workload involved.
• Withdrawal rules are useful guides but not mandates—adapt, revisit, and personalize as needed.

Want deeper dives? Check out Ben’s Talking Wealth episodes, especially interviews with Bill Bengen (4% rule originator) and Stefan Sharkansky (variable withdrawal strategies).