Hello, YieldAlley readers! In this issue:
The Creator of the 4% Rule Now Says You Can Spend More
U.S. Stocks Rally on Dovish Fed Signals and Soft Economic Data
10% Off Target Gift Cards
America’s slow breakup with eating turkey, in 4 charts
And more!
NEWS
Standout Stories
💸 Stock Buybacks Are Booming in 2025. That’s Bad News for Dividend Investors (Morningstar)
🛍️ AI helps drive record $11.8 billion in Black Friday online spending (Yahoo Finance)
📺 How Mark Wahlberg Became The King Of Streaming (Forbes)
🏝️ My Wife and I Planned Our Retirement Perfectly. Then She Got Sick. (WSJ)
🧠 The 25 most powerful ideas of the 21st century (so far) (BBC)
MARKET THOUGHTS
U.S. Stocks Rally on Dovish Fed Signals and Soft Economic Data
ECONOMY
U.S. jobless claims hit their lowest level since April at 216,000 for the week ended November 22, down from 222,000 the prior week, though continuing claims increased by 7,000 to 1.960 million approaching the year-to-date high. Consumer confidence fell sharply in November with The Conference Board's index dropping 6.8 points to 88.7, the lowest level since April, as consumers cited prices and inflation, tariffs and trade, and politics as leading concerns. The Commerce Department reported delayed September retail sales data showing a 0.2% increase down from 0.6% in August and below the 0.4% estimate, while control group sales declined 0.1% month over month signaling slowing consumer spending to end the third quarter. The Federal Reserve's Beige Book noted little change in overall economic activity across most districts while employment declined slightly and prices rose moderately with input cost pressures widespread in manufacturing and retail largely reflecting tariff-induced increases, though higher-end retail spending remained resilient.
STOCKS
U.S. stock indexes finished the holiday-shortened week higher boosted by dovish comments from Federal Reserve officials and weaker-than-expected economic reports that reinforced expectations for a December rate cut, with the S&P 500 advancing 246.10 points to 6,849.09 up 16.45% year-to-date, the Nasdaq Composite rebounding 1,092.60 points to 23,365.69 up 21.00% year-to-date recovering from the prior week's sell-off as AI valuation concerns took a back seat to growth optimism, and the DJIA rising 1,471.01 points to 47,716.42 up 12.16% year-to-date. Small-cap stocks outperformed their large-cap peers with the Russell 2000 Index advancing 5.52% or 130.85 points to 2,500.43 up 12.12% year-to-date, while the S&P MidCap 400 gained 125.09 points to 3,308.49 up 6.01% year-to-date showing continued strength in smaller companies. Markets were closed Thursday in observance of the Thanksgiving holiday.
FIXED INCOME
U.S. Treasuries generated modestly positive returns for the week as yields on most maturities decreased amid heightened expectations that the Federal Reserve will ease borrowing costs in December, with bond prices moving inversely higher providing support to fixed income investors. Municipal bonds advanced though issuance in the market was modest and secondary market liquidity faded throughout the week, with new supply pressures remaining relatively muted compared to typical pre-holiday periods. Investment-grade corporate bonds generated positive returns and outperformed Treasuries amid the week's improved risk sentiment, benefiting from tighter credit spreads as investors showed increased appetite for corporate credit exposure. High yield bonds also outperformed Treasuries with stronger performance concentrated in higher-quality issues as the broader improvement in market sentiment supported the asset class, though lower-rated bonds showed more muted gains reflecting continued selectivity among credit investors.
INCOME BUILDING
The Creator of the 4% Rule Now Says You Can Spend More
The 4% rule has guided retirement planning for over 30 years. Today, many financial researchers suggest retirees can safely withdraw more, perhaps 5% or higher, without running out of money. Understanding why requires looking at what's changed since the original research.
On a recent podcast, Bill Bengen, the creator of the 4% rule, explained why he now believes retirees can safely withdraw more than his original research suggested. Bengen himself recently increased his personal withdrawal rate to 5% and is considering going higher. His updated research, incorporating more asset classes and better understanding of market conditions, points to 4.7% as the new worst-case scenario, with many retirees able to safely withdraw even more.
The Original Framework
Financial planner Bill Bengen introduced the 4% rule in the early 1990s after analyzing historical market data back to 1926. The rule was simple: withdraw 4% of your portfolio in the first year of retirement, then adjust that dollar amount for inflation each year. This approach survived every historical period tested, including the devastating 1968 retirement cohort that endured two major bear markets plus high inflation.
The framework assumed a 30-year retirement, a balanced portfolio of stocks and bonds, and withdrawals from tax-advantaged accounts. Most importantly, the 4% figure represented the worst-case scenario, the withdrawal rate that survived even the unluckiest retirement dates in history.
What's Different Now
Several factors suggest higher withdrawal rates may be sustainable today.
Modern analysis incorporating mid-caps, small-caps, and international stocks shows these additions consistently increase safe withdrawal rates. Bengen's most recent research using a seven-asset portfolio pushed the safe withdrawal rate from 4.5% to 4.7%, and that's still using a worst-case historical scenario. The original research used just three asset classes.
Earlier recommendations suggested 50-55% stocks for retirees. Current research indicates 65% stocks works better across nearly all historical periods, providing enough growth to support higher withdrawals while managing downside risk. Higher equity exposure especially benefits younger retirees with longer time horizons.
Bengen's latest work identifies two key factors that predict withdrawal success: inflation levels and stock market valuations. When both are favorable, low inflation and reasonable valuations, historical safe withdrawal rates jumped to 6-8% or higher. Even in mixed conditions, rates above 5% proved sustainable.
Research over the past decade demonstrated that increasing stock exposure during retirement, rather than keeping it fixed or declining, improved withdrawal success rates. Starting with lower equity exposure around 45-50% and gradually increasing to 65-75% helps manage sequence of returns risk early in retirement while capturing growth later.
The Practical Reality
4% was never the maximum safe withdrawal rate. It was the minimum rate that worked under the absolute worst historical conditions. Most retirees throughout history could have withdrawn significantly more.
Consider Bengen himself. When he retired in 2013, he started at 4.5% despite his research showing higher rates were likely safe. After a dozen years of strong market performance, he recently increased his personal withdrawal rate to 5% and is considering going higher. His caution stems from a fundamental truth: one or two good market years don't guarantee the trend will continue.
Higher withdrawal rates come with tradeoffs. Most research assumes tax-deferred accounts. Taxable account withdrawals face different math, as do Roth accounts. Your specific tax situation matters.
Required minimum distributions follow their own schedule, starting around 4-5% in your early 70s but rising slowly. They won't necessarily align with an inflation-adjusted withdrawal strategy, potentially creating a mismatch in later years.
Starting retirement during an expensive market increases sequence of returns risk. The 1968 retiree faced not just bear markets but an overvalued starting point. Current market valuations deserve consideration in your personal calculation.
Planning to leave money to heirs requires different math than spending down to zero. A 5% withdrawal rate with a zero-balance goal allows more spending than the same rate with a legacy target.
Implementing Higher Rates
If you're considering a withdrawal rate above 4%, focus on these factors.
Review your equity allocation: Most research supporting 5% or higher rates assumes 60-70% stocks. Lower equity exposure may not provide sufficient growth to sustain these withdrawal levels over a full retirement.
Consider your rebalancing strategy: Annual rebalancing worked well in historical testing, providing a middle ground between no rebalancing and more frequent adjustments.
Evaluate your personal situation against worst-case scenarios: The 4% rule survived 1968, two massive bear markets plus double-digit inflation. If you believe we won't see anything that severe in your retirement, higher rates become more viable.
Account for Social Security or pensions: If these cover your basic needs, portfolio withdrawals fund discretionary spending. This changes your risk tolerance significantly. You might be comfortable with lower equity exposure and lower withdrawal rates since the portfolio is less critical to your survival.
The Bottom Line
The 4% rule represented financial planning's version of a worst-case stress test. It answered the question: what withdrawal rate survived every possible historical scenario? For most retirees, it proved extremely conservative.
Current research suggests 5% is reasonable for many retirees, particularly those with diversified portfolios, appropriate equity exposure, and flexibility to adjust spending if needed. Some may safely withdraw even more depending on market conditions at retirement, their time horizon, and their specific tax situation.
The important shift isn't from 4% to 5%. It's recognizing that retirement withdrawal rates depend on current conditions: inflation, market valuations, your portfolio construction, and your personal circumstances, rather than a one-size-fits-all rule. The 4% rule provided a valuable starting point. Today's research gives us better tools to move beyond it.
INCOME BUILDING
Cash Rates
Government Money Market Funds (7-Day Yields)
SNVXX (Schwab Government Money Fund - Investor Shares): 3.71%
SPAXX (Fidelity Government Money Market Fund): 3.59%
TTTXX (BlackRock Liquidity Funds: Treasury Trust - Institutional Class): 3.79%
VMFXX (Federal Money Market Fund): 3.90%
Brokered CD Rates (6-Month Rate)
Charles Schwab: 3.84%
E*Trade: 3.85%
Fidelity: 3.80%
Merrill Edge and Merrill Lynch: —
Vanguard: 3.85%
ETFs (30-Day Yields)
SGOV (iShares 0-3 Month Treasury Bond ETF): 3.86%
BIL (SPDR Bloomberg 1-3 Month T-Bill ETF): 3.73%
USFR (WisdomTree Floating Rate Treasury Fund): 3.86%
TFLO (iShares Treasury Floating Rate Bond ETF): 3.87%
DEALS AND BONUSES
10% Off Target Gift Cards
Target will bring back its popular gift card promotion for the holidays. For two days only, you can get 10% off on multiple gift cards, limited to 1 purchase per account, with a maximum purchase amount of $500.
Offer Details
Promotional discount: 10% off gift cards
Purchase limit: 1 transaction per account
Maximum purchase: $500
Delivery formats: Physical gift cards, email delivery, or mobile delivery electronic gift cards
Eligibility: Target Circle members only (free membership)
Activation required: Must log in and add the 10% off Circle offer to account before purchase
Promotion dates: December 6-7, 2025
Maximum savings: $50 (10% of $500 maximum purchase)
Our Thoughts
This annual promotion delivers straightforward value for planned Target spending. Maximum benefit optimization requires purchasing the full $500 limit on gift cards you'll definitely use, whether for household essentials, groceries, or holiday shopping. The single-use restriction per account limits household scaling, though couples with separate Circle accounts can double the benefit.
Picture of the Week
