Q. I am 58 and would like clarification about taking out 4 percent per year from one's savings and investments in order to meet living expenses. At what age does one consider that 4 percent would be the appropriate amount– 62, 66 or 70?

How does Social Security factor into the 4 percent considering that the income from SS is different if one starts taking it at 62, 66 or 70?   —M.P., by email

A. There is no iron-clad rule for withdrawal rates. All the rules-of-thumb that you see discussed are based on probability studies of how long different portfolios will last at different rates of withdrawal. If you retire at age 65 the odds are with you for a withdrawal rate of 4 to 5 percent. If you are younger than that, or come from a long-lived family, you should make withdrawals at the low end of that range. If you are older than that or have a shorter than average life expectancy, you can withdraw toward the higher end of the range.

Another thing to remember is that all these probability studies were done in periods where interest rates and stock dividend yields were considerably higher. For instance, the yield on a 50/50 portfolio of S&P 500 index stocks and 5 year Treasury obligations is under 2 percent today. In 2000 the same portfolio provided a yield of 3.65 percent and in 1990 it provided a yield of 5.99 percent. You can read more about this on my website under "portfolio survival."

The difference in current yield is important because every dime of withdrawal that doesn’t come from current interest and dividend income must come from principal. So in 1990 you could withdraw 6 percent and not touch your principal. If you did that today you'd be taking 4 percent of your principal each year. That's a formula to go broke well before you die.

This is a serious problem, one that I pointed out in an earlier column about "Solvent Seniors" and how low interest rates had chopped their investment income. The current Federal Reserve interest rate policy— which works to hold interest rates down— may encourage home ownership and support home prices, but it also works to devastate the retirement security of older people who have saved and invested. I call it the “Hood Robin” policy, robbing savers to restore big banks and maintain egregious bonuses.

Q. What is your opinion of the recent print ads run by at least one large, highly rated life insurance company favorably comparing the returns on its whole life policies with the S&P 500? Given the relatively favorable performance, what would you say to the idea of repositioning investment assets so as to take advantage of this?  Would your answer change if the investor's use for life insurance death benefit were marginal? —J.H., by email
A. I haven’t seen those ads, but it’s got to be a misleading comparison.  Yes, the S&P 500 has provided no return over the last 10 years. But if you look at longer periods— the kind of holding periods you need to consider for buying cash value life insurance— the returns will still be better than the returns on cash value life.

At the end of 2009, for instance, the return on the S&P 500 Index over ten years was an annualized loss of 0.93 percent. Go out just 5 more years to 15 years, however, and the annualized return rises to 8 percent. At 20 years the return rises a bit more, to 8.2 percent. And at 30 years it rises to an annualized rate of 11.2 percent.

Since the value of cash value life policies has to swim against the always rising cost of the actual life insurance, it is a reasonable bet that very few policies would have grown cash values at between 8 percent and 11 percent annually over the last 15 to 30 years.

Most people need to keep their life insurance and investing separate because they can grow their assets faster outside a life policy than inside a life policy. Equally important, they won’t have need of a life policy (and its expense) when their savings can replace their labor earning power.