The Stacking Benjamins Show: Is the 4% Rule In Play? (SB1702) – Detailed Summary

Release Date: June 30, 2025

Introduction

In this episode of The Stacking Benjamins Show, hosts Joe Saul-Sehy and OG delve into the evolving landscape of retirement planning, specifically examining the famed 4% rule. Amidst their characteristic humor and friendly banter, they unpack recent developments that challenge long-standing financial guidelines, offering listeners both insights and practical advice.

Revisiting the 4% Rule

Background of the 4% Rule

The 4% rule, introduced by Bill Bangin in 1994, has been a cornerstone in retirement planning. It suggests that retirees can withdraw 4% of their retirement portfolio annually, adjusted for inflation, with a reasonable expectation that their funds will last for 30 years.

Bangin’s Revision to 4.7%

Recent insights from Bangin have prompted a re-evaluation of this rule. As noted by Joe Saul-Sehy at [09:11], referencing Market Watch, Bangin realized, “he had no idea it would take on a life of its own in scholarly debates, the media and public discourse.” This led to his introduction of a more generous withdrawal rate.

Key Insights from the Hosts

• OG’s Perspective ([09:59]): OG emphasizes the importance of the margin of safety, explaining, “if you're, if you've got a million bucks and 40,000 is your number and if you spend 38 5, you're living destitute...if you have $4 million...you have a lot more margin of safety to play with.”

• Clarifying the 4% Rule ([10:39] Joe): Joe breaks down the rule for listeners, stating, “if you had a million dollars in year one, you took 40,000 in year two, you took 40,000 plus inflation in year three...should be fine.”

• Shift to a 4.7% Rule ([13:44] Joe & [14:01] OG): The hosts discuss Bangin’s "aha moment," leading to a revised rule of 4.7%, which OG humorously notes as “much easier” than complex calculations.

Evolution of Investment Assumptions ([12:08] OG): OG highlights that Bangin’s original assumptions—primarily a stock-bond mix with specific return rates—have been updated to include a broader array of asset classes. This diversification has enabled a higher, more sustainable withdrawal rate.

Notable Quotes:

• Joe Saul-Sehy: “It's not even frankly a rule as much as just starting post.”
• OG: “It's almost 20% more from a cash flow standpoint.”

Understanding Sequence of Returns Risk

Definition and Importance ([33:18] Joe & [34:20] OG):

Sequence of returns risk refers to the danger that the order of your investment returns—especially early in retirement—can negatively impact the longevity of your portfolio. The hosts explain that poor returns in the initial years of retirement can significantly deplete assets, making it harder for the portfolio to recover.

Listener Question: Tony’s Inquiry ([31:18] Joe & [32:26] Doug):

A listener named Tony poses a humorous yet insightful question linking workout routines to retirement planning, highlighting the confusion around financial terminology.

Hosts’ Explanation ([35:43] Doug & [36:45] Joe):

• OG’s Breakdown ([37:00] OG): OG illustrates the concept with relatable examples, emphasizing the importance of having a cash reserve to mitigate the impact of market downturns. “You have to put some parameters around this because you have to know what kind of average market ups and downs are going to look like.”

• Practical Strategies ([38:21] Joe): Joe suggests maintaining a separate cash account to avoid selling investments at depressed prices during market lows.

Notable Quotes:

• Joe Saul-Sehy: “Sequence of returns risk has to do with the ratio of your distribution, your portfolio value when you start.”
• OG: “So you’re not forced to sell those securities at a lower price. You just wait it out.”

Listener Interaction: "Good Call Saul"

Caller Tony’s Question ([31:17] Doug & [32:31] Doug):

Tony humorously intertwines fitness jargon with financial terminology, asking why sequence of returns risk is a concern early in retirement but not later. The hosts adeptly navigate his metaphor, transforming his workout routine confusion into a meaningful financial discussion.

Hosts’ Response ([33:18] OG & [34:20] Joe):

They clarify that sequence of returns risk primarily affects the early stages of retirement because the same percentage downturn has a more substantial impact when the portfolio is just beginning to be drawn down.

Second Half Segments

Trivia: Mike Tyson’s Bite ([27:31] OG & [29:02] Doug):

Doug shares a trivia segment about Mike Tyson famously biting off an opponent’s ear in 1997, humorously linking it to financial lessons about not overextending withdrawals.

TikTok Minute: Coffee vs. Green Tea ([30:07] Joe & [30:37] Doug):

The hosts critique a TikTok hack suggesting replacing morning coffee with green tea to lose up to “87% of the joint,” leading to a playful debate on the authenticity and practicality of the advice.

Discussion on Previous Episodes: Food Waste

Recalling the Brian Sutt Episode ([42:05] Doug & [43:16] Joe):

They recap a previous episode featuring Brian Sutt and Len Penzo, focusing on strategies to reduce food waste. The hosts mention practical tips like labeling leftovers with masking tape to track freshness, which can save listeners significant amounts annually.

Listener Feedback ([43:37] OG & [44:15] Joe):

Listeners like James and Lynn share their experiences implementing these strategies, highlighting community engagement and the practical benefits of reducing food waste.

Key Takeaways

1. Reevaluation of the 4% Rule:

   • Bill Bangin has revised his original 4% rule to a more generous 4.7%, considering extended retirement periods and diversified asset classes.
   • This adjustment allows retirees to withdraw more annually while maintaining portfolio longevity.

2. Managing Sequence of Returns Risk:

   • Early retirement years are critical; poor market performance can drastically affect long-term finances.
   • Maintaining a cash reserve and having predefined guardrails can mitigate these risks.

3. Personalized Financial Planning:

   • Rules of thumb should serve as starting points, not rigid guidelines.
   • Retirees should tailor their withdrawal strategies based on individual circumstances, market conditions, and lifespan expectations.

4. Community and Practical Advice:

   • Engaging with the community through listener questions and feedback enriches the financial planning experience.
   • Practical tips, like reducing food waste, can lead to substantial financial savings.

Notable Final Quotes:

• Doug: “If you throw away 30% of your food, you have other priorities and haven't made this a priority.”
• Joe Saul-Sehy: “If you start off with your own financial plan... use the 5 1/2% rule for you now.”

Conclusion

In this insightful episode, The Stacking Benjamins Show challenges conventional wisdom surrounding the 4% rule, presenting a nuanced perspective that accommodates today's economic realities. Through engaging discussions, listener interactions, and practical advice, Joe and OG empower their audience to make informed and personalized retirement planning decisions.

For more financial insights and to join the conversation, visit StackingBenjamins.com and subscribe to their newsletter at StackingBenjamins.com201.