https://www.forbes.com/sites/kotlikoff/2018/06/25/the-4-retirement-asset-spend-down-rule-is-rubbish/2/#322f74d621d8Agree or disagree on the 4% rule, at least apply it correctly.

Here is the nonsense from the article:

My pretend couple is age 66, married, has $500,000 in regular assets and $1 million each in retirement accounts. Their house is paid off, but their annual property, insurance and maintenance costs total $14,000. Each spouse just filed to collect a $2,500 monthly Social Security retirement benefit and each spouse just initiated annual smooth retirement account withdrawals. The couple earns 1% real on their regular assets and 2.5% real on their retirement accounts.

Let's call this couple the Saunders. What's the Saunders' proper spending rule? Is it 4% of their age-66 assets? No, it's 6.2%. If they have $2 million in regular assets it's 5.3%. If they have zero regular assets and $275,000 each in retirement accounts, their spending rule is 10.5%.

Aside from the article being a transparent pitch for his MaxFI planner, here are the problems I see with this:

1) He clearly defines the 4% rule as about spending, but then applies it as a product of assets. The math isn't supported by how he reached his varying percentages, so I'm not sure where these percentages come from. He conveniently omits the $30,000 or $60,000 in SS benefits they are obtaining as well (the 'each spouse just filed' reads as if independently, but even if the total benefits is 30K, so what?)

2) The 4% rule takes into account inflation, so using the 'real' percentages is disingenuous. It should either be the return in total, or the 4% rule should be the 2% rule. If you add back in the missing ~2% that the 4% rule already takes into account on just their assets then they have a return rate of 4.2% on the 2.5 million. Which means if they withdraw only that amount for the rest of their lives to live off of, they will never lose money.

3) The only spend he includes is the $14,000 in fixed costs, as if that alone is relevant. What does one fixed cost have to do with annual spending? It is as if he is assuming humans are incapable of budgeting or knowing their annual spends.

The rule is focused on steady annual spending as a share of initial retirement assets.

This I think is the problem. The rule is not based on spending as a share of initial retirement assets, it is that spending should be 4% of initial retirement assets. The spending dictates the needed retirement balance, not figuring out what spending can be done from a static retirement balance. Sure, if you have 2.5 million and 60 grand a year in SS, you can spend much more than you probably have in the past, but that doesn't change the fact that you 'won' when your spend hit 4% of your assets.

Am I missing something?