You lost your Social Security card. The card itself is not much of one. Thieves could use your Social Security number to apply for new credit cards in your name, racking up debt without you even realizing. You are entitled to one free credit report from each of the three national credit bureaus — Experian, Equifax, and TransUnion — each year. A simple fix if there's no evidence of identity theft If you want a new Social Security card, you may be able to apply for a replacement on the Social Security Administration's website. If you don't meet the criteria for an online application, you can submit an application for a replacement card in person or by mail to your local Social Security office. What if you're a victim of identity theft? If you have evidence that someone else is using your Social Security number, you can request a new Social Security number from the Social Security Administration. For example, your evidence could be a credit report listing several credit cards that you've never applied for. Or, evidence could be a letter from the IRS informing you that your income tax filings were rejected because someone else already filed them.
Whenever you’re striving toward a financial goal, it’s helpful to have a number in mind. That’s why the 4% retirement rule is so popular among retirement savers: It gives you a way of figuring out exactly how much money you should aim to save toward retirement. Yet there are several ways in which the 4% retirement rule falls short of working perfectly, and some investors feel more comfortable merely using the rule as a starting point and then looking to improve on it.
The appeal of the 4% retirement rule
People like the 4% rule because of its simplicity. To figure out how much you can afford to withdraw from your retirement savings, just multiply it by 4%. You can use the rule to reverse-engineer how much you need to save. If you expect to need $40,000 per year in retirement, then save $1 million, because 4% of $1 million is $40,000.
The 4% rule does have analytic origins, going back to research in the early 1990s that looked at the historical returns of various types of investments. The conclusion of the research was that with a balanced portfolio between stocks and bonds, you could start by taking 4% of your savings the first year, and then increasingly that amount by the rate of inflation every year after that. So as an example, if you saved $250,000 in your retirement account, then the first year, you’d withdraw $10,000. If inflation was 3%, then in year 2, you’d withdraw $10,300. Subsequent payments would grow with inflation, keeping your theoretical purchasing power constant. If you did that, according to the research, you would be able to make your money last at least 30 years into retirement.
Some problems with the 4% rule
The seeming simplicity of the 4% rule hides some flaws. The first is that it’s based entirely on backward-looking performance data. Admittedly, the analysis included some very tough market environments, including the Great Depression. However, there’s no guarantee that future markets might not be worse, and that could lead to the rule no longer working as intended. In particular, bad performance early in retirement has an especially adverse impact on the 4% rule, because the reduction in principal value increases the percentage of your entire portfolio that you withdraw each year. For instance, if you withdraw 4% the…