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If you’re retired (or planning your retirement—which, of course, we all are!), I have great news: You can probably take a lot more out of your nest egg every year than you think.
I’m talking about safely withdrawing 8% or more from your portfolio—without the prospect of living a lot longer than your money does!
We can thank an unlikely wealth generator for this turn of events: AI.
Before you ask, no, I’m not talking about putting a chatbot in charge of your finances! I’m talking about a low-key way the tech is helping retirees (and near-retirees) boost both their investment income and their net worth, leading to that huge 8%+ withdrawal rate we just talked about.
To get at the reason why we can do this, let me take you back a bit over 30 years, to 1994. Back then, financial advisor William Bengen released his landmark study showing that most retirees could safely withdraw 4% of their investments every year without the fear of running out of money in retirement.
But as the years wore on, that number turned out to be far too conservative.
Just ask Bengen himself! He later said that new research led him to recommend a different number: 4.7%. Now he says, “The 4.7% rule is the worst-case scenario … designed for only the most conservative person to use in retirement planning.”
AI: Retirees’ New BFF
Why did 4% become 4.7%? One reason is the stock market’s strong long-term performance.
Remember that Bengen released his study in 1994, when the internet was starting to hit the mainstream. Since then, the internet (along with other technologies it’s spurred) has boosted productivity dramatically.
In part thanks to that boost, the S&P 500 has posted a sparkling annualized total return of 11.7% over the last 30 years.
In other words, if you’d been living off your portfolio for all of that time, you could have set aside a bit for inflation and withdrawn more than 8% every year. That’s just by investing in an index fund!
How the AI-Driven Productivity Bonanza Will Boost Your Retirement
The internet’s spread through the economy was slow and uneven. AI, on the other hand, is spurring productivity gains right now.
In the second quarter of 2025, productivity rose 3.3%, after climbing 2.8% in 2024. These are huge numbers, especially when you consider that since the Bureau of Labor Statistics started keeping track in the 1940s, productivity has grown about 2% a year.
If productivity stays this high, we should see stronger growth that boosts stocks and makes higher withdrawal rates easier to maintain. But, income investors that we are, we’re not tapping that boost through an index fund. Instead we’re looking to one of our favorite equity-focused closed-end funds (CEFs).
That’s because, thanks to this CEF’s high yield, our withdrawal rate could very well be zero. We’ll build our retirement on dividends alone while letting our nest egg grow as AI supercharges productivity.
The Ticket to Fast Financial Independence
The Adams Diversified Equity Fund (NYSE:ADX), as members of my CEF Insider service know, holds large-cap US stocks, with a portfolio consisting of tech high-flyers like NVIDIA (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL), as well as other strong performers, such as Bank of America (NYSE:BAC), AbbVie (NYSE:ABBV) and Visa (NYSE:V).
The fund has returned 11.4% annualized over the last 30 years. This, in theory, could sustain an 8.4% withdrawal rate after we set aside a bit for inflation. But if we dig into the numbers, the story gets even better.
Over the years, ADX has tied its dividend to the performance of its portfolio and has paid the bulk of its yearly payout as a year-end special dividend. More recently, it has shifted to paying 8% of its portfolio value in quarterly installments. This means the payout shifts with the portfolio’s value and market conditions.
That slight fluctuation in the payout is more than worth it for us, as it allows management to reinvest more when it spots bargains in the market. And it’s still provided a monster income stream over time: If you retired 30 years ago and depended on ADX for income, your first year of holding got you about a 9.6% income stream that averaged around 9% from then to now.
That translates into a 6.6% safe withdrawal rate, after putting aside some money for inflation. But that isn’t even necessary because the fund’s price has soared! Over the past 30 years, ADX’s price has gained around 182%.
ADX Soars, Even Without Its Dividend Included
In other words, a hypothetical investor who invested 30 years ago not only had a sustainable income stream far ahead of Bengen’s 4%, or even his later revision of 4.7%, but they grew their principal the entire time, too!
This price-growth-plus-high-income setup is the beauty of CEF investing, and I see it getting even better as AI supercharges productivity in the coming years.
Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, "7 Great Dividend Growth Stocks for a Secure Retirement."
