http://money.cnn.com/2007/08/13/pf/expert/expert.moneymag/index.htm
Retirement: The 4 percent solution
Many retirees are confused about how much of their savings to take out each year. Money Magazine’s Walter Updegrave explains the 4 percent rule.
Money Magazine
By Walter Updegrave, Money Magazine senior editor
August 14 2007: 10:32 AM EDT
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NEW YORK (Money) — Question: I’ve read that if I withdraw roughly 4 percent of my retirement savings each year to live on, my money will last virtually forever. But does this 4 percent include the money my portfolio already kicks off in dividends and interest? Or is the 4 percent withdrawal on top of that? – Doug Martin, Syracuse, New York
Answer: First, let me say you’re not the only person mystified by the workings of the 4 percent withdrawal rule. I get questions about it all the time, so I’m happy to clear up the confusion.
Money Magazine’s Walter Updegrave gives his advice on the best way to maximize your retirement savings when you are just starting out.
And while I’m doing that, I’d also like to point out that, like any rule of thumb, this one is really only a general guideline. It’s not as if the Retirement Gods have decreed that everyone must use a 4 percent initial withdrawal rate, or that doing so guarantees the best retirement.
But before I get into some of the subtleties about this oft-quoted rule, let me explain how it works. Many people think that the 4 percent rule means that you simply withdraw 4 percent of retirement savings each year. But that’s not right. In fact, the 4 percent figure applies only to the percentage of your savings that you withdrawal the first year of retirement.
You then increase the dollar amount of that initial withdrawal for inflation each year.
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Rules of thumb are great. Even if they made the mistake and took 4% each year, they wouldn’t be far wrong. And, if else fails, one COULD — not recommended — buy a low cost annuity and take all the guess work out of it.
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Reinke Faces Life 
I reread there advice and I think it means 4% each year; not a progression.
If you’re drawing at 4 while earning 4 to 10 in a well diversified portfolio, then you can’t run out.
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So that means by year 10 of retirement you withdraw 14 percent (4% the first year, and increase a percent every following year..) sounds like a recipe for diaster to me………
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