The four percent rule is a popular guideline for retirement withdrawals. But what is it, and is it a good strategy for retirement?

Robert "Bob" Powell and Michael Finke, Professor of Wealth Management at the American College of Financial Services, break down everything you need to know about the 4% rule, other retirement strategies, the annuity puzzle, the Monte Carlo analysis, and more in this week's episode of Decoding Retirement.

The 4% rule (00:20)

The 4% rule suggests retirees can withdraw 4% of their savings each year, adjusting for inflation, and not run out of money over 30 years.

"I think a lot of people are not really aware of the details of the 4% rule. The 4% rule says that if you retire with a million dollars, you should be able to spend $40,000 the first year of retirement and then increase that amount by the rate of inflation every year, and then not run out of money in retirement," Finke explains. "It's judged usually on a 30-year time horizon. So if the money is still around after 30 years, if you still have some money in the bank, then it's considered to be a successful retirement."

Ask Bob: Medicare for non-US citizens (12:20)

Question:

Can I be eligible for Medicare if I am not a US citizen?

Answer:

Yes, non-US citizens can be eligible for Medicare under certain circumstances. According to Jae Oh, author of "Maximize Your Medicare', green card holders can qualify for Medicare if they:

? Are age 65 or older

? Have lived continuously in the US for at least 5 years

? Have worked and paid Medicare taxes for at least 40 quarters (10 years)

The annuity puzzle (13:00)

The annuity puzzle is the phenomenon where people rarely purchase individual annuity contracts, despite the theoretical benefits of doing so.

People seem to have an aversion to buying annuities. Powell and Finke discuss how people can get over that reluctance. "A great way to think about it is to focus less on your investment portfolio and more on your lifestyle. So, the big problem that I see is that people get to retirement. They've saved a million dollars or $2 million or $500,000, and they just put their arms around that nest egg and they don't want to see it get smaller," Finke says. "We have to become more comfortable with the idea that we need to spend the money down. And when you become comfortable with that idea, then buying something like an income annuity makes a lot more sense. It's a lot easier to take."

Ask Bob: Spousal vs. survivor benefits: What's the difference? (22:55)

Question:

What's the main difference between spousal benefits and survivor benefits?