GEPF

What Is The 4 Rule For Retirement

Retirement is a phase of life when an individual stops working permanently, typically after reaching a certain age or achieving enough financial security. Being retired marks the end of a career and the beginning of a period where an income primarily comes from savings, pension, or government benefits rather than employment.

What Do We Mean As The 4 Rule For Retirement?

The 4 rule for retirement budgeting suggests that a retiree should be able to withdraw 4% of the balance in their retirement account in the first year after retiring, and then withdraw the same dollar amount, adjusted for inflation, every year thereafter for approximately 30 years.

The 4% rule aims to provide a consistent income stream while preserving enough account balance for future needs. With a reasonable investment return, the withdrawals are expected to come mainly from interest and dividends.

Does The 4 Rule Still Work?

The 4% was planned to support the financial needs of an average retiree for about 30 years. However, it may need adaptation based on market conditions, portfolio diversification, taxes, and individual expenses. Raising the withdrawal rate to 5% can provide a more comfortable lifestyle but also increases risk. Lowering it to 3% could also make your savings last longer but limit spending flexibility.

ALSO READ; How is your pension lump sum calculated?

Pros Of The 4 Rule For Retirement

It’s simple to follow
Provides predictable, steady income
Protect you from running out of money in retirement

What The GEPF Invests In

There are four main classes of assets that the Government Employee Pension Funds invest in. They are:

Equities
Bond
Properties and
Isibaya Funds

Client Centre

GEPF Administration Office

Building 2A, Trevenna Campus

Corner Meintjies and Francis Baard

Street

Sunnyside, Pretoria

Tel: +27 80 011 7669

Fax: +27 12 326 2507

The 4 rule is a guideline designed to help retirees determine a sustainable withdrawal rate from their retirement savings. By allowing a 4% annual withdrawal, retirees aim to preserve their capital while providing a steady income stream for approximately 30 years. Visit the website for more information

Linda Nartey