PLANSPONSOR - May/June 2024 - 36

FINANCIAL WELLNESS
Savings Need to Last
An overlooked factor in financial wellness is participant withdrawal rates
" F
influencer " Dave Ramsey, founder and CEO of Ramsey
Solutions in Franklin, Tennessee, caused a retirement
ruckus a few months back when he suggested that his
followers could safely withdraw 8% per year from their nest egg
in retirement.
Leading retirement researchers quickly tore apart Ramsey's
analysis, claiming that it made a basic math mistake, confusing
geometric returns with arithmetic returns.
Most retirement plan participants likely missed the
kerfuffle entirely, but it did highlight
the difficulties that
participants face in determining a safe withdrawal rate once
they reach retirement-and the role that plan sponsors should
play in helping them make that determination.
Conventional wisdom has held that 4% is a safe starting withdrawal
rate for most folks, a number they should adjust annually
for inflation. That approach comes from a 1994 paper by financial
adviser William Bengan. But it is not without detractors.
" I've never been a fan of the 4% rule, " says David Lau, founder
36 PLANSPONSOR.COM May - June 2024
Art by Summer Lien
and CEO of DPL Financial Partners in Louisville, Kentucky.
" It's overly simplistic and, at the same time, very complicated.
Financial advisers have difficulty administering it, so it's really
difficult for individuals. And there are a lot of risks involved. "
One of the biggest of those is sequence of returns risk, especially
if retirees face a bear market early in their retirement.
" If your withdrawal rate is always based on the portfolio
value and you have a significant downturn in the market, that 4%
might balloon to 6% or 7% in today's terms, " says Idin Eftkhari,
a senior analyst with Cerulli Associates in Boston.
Another limitation of the 4% rule stems from the fact that
it considers investments only and does not factor in the role of
Social Security or other retirement income such as payments
from an annuity. That is because Bengan's original paper was
not created as a road map for future retirees, but rather as an
academic exercise looking at a safe withdrawal rate based on a
portfolio only, Lau says.
Like most personal finance calculations, the appropriate
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PLANSPONSOR - May/June 2024

Table of Contents for the Digital Edition of PLANSPONSOR - May/June 2024

Insights
The Proactive Adviser
Mastering the In-Plan Annuities
2024 Plan Sponsor of the Year Finalists
Why a Second Committee?
Savings Need to Last
DOL Finalizes QPAM Exemption
Filing a VFC Application?
Careful Consideration
PLANSPONSOR - May/June 2024 - Cover1
PLANSPONSOR - May/June 2024 - FC1
PLANSPONSOR - May/June 2024 - FC2
PLANSPONSOR - May/June 2024 - Cover2
PLANSPONSOR - May/June 2024 - 1
PLANSPONSOR - May/June 2024 - Insights
PLANSPONSOR - May/June 2024 - 3
PLANSPONSOR - May/June 2024 - 4
PLANSPONSOR - May/June 2024 - 5
PLANSPONSOR - May/June 2024 - 6
PLANSPONSOR - May/June 2024 - 7
PLANSPONSOR - May/June 2024 - 8
PLANSPONSOR - May/June 2024 - 9
PLANSPONSOR - May/June 2024 - 10
PLANSPONSOR - May/June 2024 - 11
PLANSPONSOR - May/June 2024 - 12
PLANSPONSOR - May/June 2024 - 13
PLANSPONSOR - May/June 2024 - 14
PLANSPONSOR - May/June 2024 - 15
PLANSPONSOR - May/June 2024 - 16
PLANSPONSOR - May/June 2024 - 17
PLANSPONSOR - May/June 2024 - The Proactive Adviser
PLANSPONSOR - May/June 2024 - 19
PLANSPONSOR - May/June 2024 - 20
PLANSPONSOR - May/June 2024 - 21
PLANSPONSOR - May/June 2024 - Mastering the In-Plan Annuities
PLANSPONSOR - May/June 2024 - 23
PLANSPONSOR - May/June 2024 - 24
PLANSPONSOR - May/June 2024 - 25
PLANSPONSOR - May/June 2024 - 2024 Plan Sponsor of the Year Finalists
PLANSPONSOR - May/June 2024 - 27
PLANSPONSOR - May/June 2024 - 28
PLANSPONSOR - May/June 2024 - 29
PLANSPONSOR - May/June 2024 - 30
PLANSPONSOR - May/June 2024 - 31
PLANSPONSOR - May/June 2024 - 32
PLANSPONSOR - May/June 2024 - 33
PLANSPONSOR - May/June 2024 - Why a Second Committee?
PLANSPONSOR - May/June 2024 - 35
PLANSPONSOR - May/June 2024 - Savings Need to Last
PLANSPONSOR - May/June 2024 - 37
PLANSPONSOR - May/June 2024 - DOL Finalizes QPAM Exemption
PLANSPONSOR - May/June 2024 - Filing a VFC Application?
PLANSPONSOR - May/June 2024 - Careful Consideration
PLANSPONSOR - May/June 2024 - Cover3
PLANSPONSOR - May/June 2024 - Cover4
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