Today’s episode of The Power of Zero Show looks at a recent podcast episode in which Suze Orman recommended having three to five years of living expenses in cash during retirement.

Experts have long debated the rate at which retirees can draw down their assets while maintaining a high likelihood of not running out of money before they die.

Since the early ‘90s, the gold standard for sustainable distributions has been the 4% Rule.

According to the 4% Rule, whether the market goes up or down, you can reliably withdraw 4% each year with high confidence that you won’t outlive your money.

David McKnight points out that Orman’s advice – keeping money in a volatility buffer account – is at odds with her stance on sustainable withdrawal rates.

For Suze Orman, you shouldn’t be taking 4% withdrawals from your retirement portfolio. Instead, she recommends a 3% distribution rate.

Studies show that if you withdraw only 3%, regardless of market conditions, you have a near 100% chance of never running out of money.

David believes that by promoting the 3% rule AND encouraging people to keep 3-5 years of living expenses in a savings account, Suze Orman is doing a disservice to her listeners.

The first problem with Orman’s advice is that, while she got the volatility buffer concept right, she failed to adjust her sustainable withdrawal rate accordingly.

Following Orman’s approach could result in massive loss of purchasing power by keeping a significant portion of your net worth in a low-yielding savings account over an extended period.

David explores whether there’s a “safe and productive” way to grow your money during retirement.

Cash value life insurance, specifically in the form of Indexed Universal Life (IUL), is a financial vehicle that protects against market loss and grows at a rate of 5-7% (net of fees) over time – within a tax-free environment.

David wraps up with some final words of advice for Suze Orman.

Mentioned in this episode:

David’s national bestselling book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free video series)

@mcknightandco on Twitter

@davidcmcknight on Instagram

David McKnight on YouTube

Get David's Tax-free Tool Kit at taxfreetoolkit.com

Suze Orman’s Podcast