I have a really basic newbie question. I often read on this site that a stash of, say, $700,000 will generate income of $28,800 using the 4% rule.
Right, but -- how do you acquire the income? My family's stash is growing but it's all in 401ks and IRAs and the like that we can't access without penalty until age 59.5. Right now we make enough to max out the 401ks and throw some at the Roths as well but that's it. We don't have a ton of money to fund a taxable account, and if I did put the money in there I'd be losing out on the tax savings of the 401k.
Of course I could choose to not reinvest earnings and dividends, but doesn't that make me dependent on how the market's doing? E.g., a year like 2013 the stash might have generated way more income than I needed. But if the market tanked on particular year, I wouldn't have enough.
Plus I WANT to reinvest earnings and dividends, as I'd like to see the stash keep growing.
I feel like I'm missing some key point. Very curious to hear the answer.