Millions of investors are potentially jeopardizing their financial futures by adhering to outdated financial rules, particularly the “rule of 25,” which suggests that individuals should save 25 times their expected annual retirement expenses. This guideline, initially posited by William Bengen, who updated his original “4% safe withdrawal rate” to 4.7% in 2022, underscores the necessity of having sufficient funds saved to avoid outliving one’s resources in retirement.
For instance, a hypothetical retiree planning for an annual expenditure of $40,000 would need $1 million saved under the “rule of 25.” However, if they leverage tools like closed-end funds (CEFs), which can provide higher yields, they might only need around $943,397, significantly reducing the time needed to accumulate this amount—from approximately 29 years to 17.5 years at a 20% savings rate with an $100,000 annual income.
The Liberty All-Star Equity Fund (USA), a prominent example of such CEFs, currently offers a 10.6% yield, allowing retirees to generate passive income without selling assets during market downturns. Over its 39-year history, USA has maintained an average payout, emphasizing its potential as a solid income-generating option for retirement planning.
