Mark Seed on the 2% Retirement Rule

By Mark Seed, myownadvisor

Special to Financial Independence Hub

Well hello!

Welcome to some new Weekend Reading related to an article I read on not 4% rules, not 3% rules but the 2% retirement rule.

The 2% Retirement Rule

“The best retirement withdrawal strategy requires flexibility and course corrections depending on the market environment, inflation and your personal spending levels. No one actually follows through with this stuff like it shows on a spreadsheet.”

These are statements that really reasonated with me from Ben Carlson’s post entitled Why the 4% Rule is More Like the 2% Rule.

• I desire flexibility related to our retirement income spending needs.
• I want to use an approach that enables course corrections to happen easily.
• I have never lived my life in a spreadsheet yet some tracking is necessary.

The 2% rule occurs when many retirees who even worry about the 4% rule constantly underspend from their portfolio from fear of outliving their money.

As Ben writes:

“There is a psychological hurdle that exists with some people because you worry about outliving your money, inflation, high healthcare costs, sequence of return risk or something coming out of left field.”

This also speaks to me.

It will be interesting to see how I combat these fears as my wife enters retirement next month and I consider retirement myself from current part-time work in 2026. Lack of a steady paycheque will be new territory to us.

Things we are considering for our retirement income spending as early retirees at least:

1. Be flexible with our spending. If markets are good/positive, we’ll consider spending more. If markets are unfavourable, then we’ll spend a bit less. Spending a bit less means cutting back on travel plans.
2. Keep a cash wedge at all times. Any money needed for spending in the next 1-2 years will be maintained in cash/cash equivalents. This way, when market corrections happen that I can’t see coming, we are ready to cover spending in advance.
3. While we don’t budget (I recently wrote about that) we do track our spending and we’ll continue to do so. This will ensure we are spending money on things we value and/or are aligned to our values.

Retirement will be uncharted waters for us. My wife begins her journey next month. Our psychological and emotional hurdles when it comes to spending money without two steady paycheques will begin very soon: it will interesting to see and feel how we manage that.

I’ll keep you posted.

Other than 1, 2, 3 above, what other advice do you have for me? Words of wisdom from folks that have been there, done that?

More Weekend Reading – Related to the The 2% Retirement Rule

Ben’s post and my reflections of it remind me of this older but goodie post from Mr. Money Mustache about retirement income planning with a fixed chunk of money.

Related to safe withdrawal rates:

“Let’s say you want to be able to spend $40,000 per year, for life, and have that spending allowance continue to grow with inflation. And you never want to make another dollar from work in your lifetime.

In this situation, the following three sentences represent the entire universe of probability for you:

• If you retire with $800,000 in investments, you will probably make it through your whole life without running out of money (a 5% withdrawal rate)

• If you start with a $1 million nest egg (a 4% withdrawal rate), you will very likely never run out of money

• If you start with a $1.33 million chunk (a 3% withdrawal rate), it is overwhelmingly certain that you’ll have a growing surplus for life.”

And finally on this theme for the weekend, Bill Bengen, the author and follower of his own 4% rule mentioned that his rule of retirement income planning quoted by many was actually too low.

This implies to me that anyone retiring today can and should consider retirement spending in the range of 4%-5% withdrawal rates from their portfolio, assuming they have a bias to stocks/equities over fixed income/bonds. Which we do. When in doubt beyond that, keep some cash handy, and be flexible with spending. Which we will also do.

Again, keep you posted. 🙂

Dividend Growth Investor reminded us about the dividend income success story and lessons learned from Anne Scheiber,who worked as an auditor for the IRS. She retired at the age of 51 in 1944, and focused on managing her portfolio for the next 51 years of her life. Anne passed away at the age of 101 with a portfolio of dividend stocks worth over $22 million. That portfolio was generating over $750,000 in annual dividend income at the time of her death.

Finally, a tiny thought on progress and success I read recently:

“Your capacity for excellence is inversely proportional to the number of your commitments.”

Mark Seed is a passionate DIY investor who lives in Ottawa.  He invests in Canadian and U.S. dividend paying stocks and low-cost Exchange Traded Funds on his quest to own a $1 million portfolio for an early retirement. You can follow Mark’s insights and perspectives on investing, and much more, by visiting My Own Advisor. This blog originally appeared on his site on Sept. 27, 2025 and is republished on Findependence Hub with his permission.