Stop worrying about the 4% rule

[2Birds1Stone]

I bet it's supposed to be 45-49 and 40-44

[spartana]

I bet it's supposed to be 45-49 and 40-44

Snort! No one can retire at 49 or earlier so that can't be it ;-).  I saw that here before and no one knew why there were two 50-54 brackets. I'm guessing a typo. At least I'm a one-percenter of something!

[Exflyboy]

I bet it's supposed to be 45-49 and 40-44

Snort! No one can retire at 49 or earlier so that can't be it ;-).  I saw that here before and no one knew why there were two 50-54 brackets. I'm guessing a typo. At least I'm a one-percenter of something!

Yes but you OBVIOUSLY were born with a silver spoon in your mouth and got a YUGE inheritance.. Simply can't be done otherwise..:)

[Brother Esau]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

[RWD]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

Of course that'll work! The funds he shills recommends give 12% returns!

[Exflyboy]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

Of course that'll work! The funds he shills recommends give 12% returns!

So what is this 12% unicorn fund that Ramsey recommends? It must be an actively managed fund and I assume has not had too long of a track record.

[nereo]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

Of course that'll work! The funds he shills recommends give 12% returns!

So what is this 12% unicorn fund that Ramsey recommends? It must be an actively managed fund and I assume has not had too long of a track record.

well, according to his website, he recommends front-end load growth funds that have 'done well' in recent years.  Having trouble finding one?  DR's website has a handly link to "investing pros* in your area", right after the link to buy his book.

*these 'investing pros' are not fiduciaries.  Now I need a shower.

[Monkey Uncle]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

Of course that'll work! The funds he shills recommends give 12% returns!

It might actually work for the average American male who works until his late 60s, develops a few lifestyle-related health conditions along the way, and doesn't make it to 80.

[RWD]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

Of course that'll work! The funds he shills recommends give 12% returns!

It might actually work for the average American male who works until his late 60s, develops a few lifestyle-related health conditions along the way, and doesn't make it to 80.

Well sure, but in that case they could be invested entirely in CDs and wouldn't run out of money.

[pecunia]

Well, with 12 percent expected return, no problem with drawing out 4 percent per year.  Shucks, I was looking at backing it down to 3-1/2 percent per annum in December.

[Exflyboy]

Well, with 12 percent expected return, no problem with drawing out 4 percent per year.  Shucks, I was looking at backing it down to 3-1/2 percent per annum in December.

Just have to give DR some money to get his secret investing formula.. Sounds strangely familiar somehow?..:)

[pecunia]

Well, with 12 percent expected return, no problem with drawing out 4 percent per year.  Shucks, I was looking at backing it down to 3-1/2 percent per annum in December.

Just have to give DR some money to get his secret investing formula.. Sounds strangely familiar somehow?..:)

Does he sell Dr. Dave Ramsey's patent medicine too?

[SwordGuy]

As for DR and the amazing 12% mutual fund, given that the information is public knowledge and no one can figure out what fund it is, I think it's likely that we'll find El Dorado first.

[sol]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

To be fair, an 8% withdrawal rate is not entirely unreasonable for the right investor.  Especially if he's in the last 10 years or so of life expectancy, higher withdrawal rates are the norm.

[tooqk4u22]

Well, with 12 percent expected return, no problem with drawing out 4 percent per year.  Shucks, I was looking at backing it down to 3-1/2 percent per annum in December.

Theoretically, that is when you should be increasing your WR.   Markets down 20% and with a 75/25 portfolio your WR would be 4.7% and that should have the same adjusted probabilities of the standard 4% "Rule".  Not saying I would do that, but it certainly wouldn't be the moment to decrease the WR.   Back in September before the drop or now for that matter as we are close to being back to the highs, then yes I would think about backing it down. 

[Malkynn]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

To be fair, an 8% withdrawal rate is not entirely unreasonable for the right investor.  Especially if he's in the last 10 years or so of life expectancy, higher withdrawal rates are the norm.

Yep.
Not everyone wants to die rich.

[pecunia]

Well, with 12 percent expected return, no problem with drawing out 4 percent per year.  Shucks, I was looking at backing it down to 3-1/2 percent per annum in December.

Theoretically, that is when you should be increasing your WR.   Markets down 20% and with a 75/25 portfolio your WR would be 4.7% and that should have the same adjusted probabilities of the standard 4% "Rule".  Not saying I would do that, but it certainly wouldn't be the moment to decrease the WR.   Back in September before the drop or now for that matter as we are close to being back to the highs, then yes I would think about backing it down.

Not there yet - still working (somewhat).  The 3.5 percent was for planning.

[John Galt incarnate!]

Does he sell Dr. Dave Ramsey's patent medicine too?

He does.

I happen to know that it's main ingredient is a rare snake venom.

Ha!

[Exflyboy]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

To be fair, an 8% withdrawal rate is not entirely unreasonable for the right investor.  Especially if he's in the last 10 years or so of life expectancy, higher withdrawal rates are the norm.

Yep.
Not everyone wants to die rich.

"Rich" is a qualitative term.

As in I am not rich as my NW is ONLY around $3M.. Warren Buffet is rich at $87bN

Some might have a different perspective..:)

[Malkynn]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

To be fair, an 8% withdrawal rate is not entirely unreasonable for the right investor.  Especially if he's in the last 10 years or so of life expectancy, higher withdrawal rates are the norm.

Yep.
Not everyone wants to die rich.

"Rich" is a qualitative term.

As in I am not rich as my NW is ONLY around $3M.. Warren Buffet is rich at $87bN

Some might have a different perspective..:)

Lol, that's like my family member who is worth several tens of millions who says she's not "rich" because she doesn't have a private plane.
...not sure what that has to do with withdrawal rates though...

Regardless of what anyone considers "rich", you need a higher withdrawal rate not to end up dead with a pile of money if that's not what you want.

[Exflyboy]

@Malkynn .. Wait, having a private plane makes you rich?.. I sold mine.. So I WAS rich, but I'm not now, even though I have more money..

I'm so confused.

I am working on increasing my 1.5% WR though...:)

[RWD]

@Malkynn .. Wait, having a private plane makes you rich?.. I sold mine.. So I WAS rich, but I'm not now, even though I have more money..

I'm so confused.

I am working on increasing my 1.5% WR though...:)

I suspect not just any private plane will do. Gotta be a private jet. And not some cheap junk like an old Westwind either, you need at least a modern Citation. My personal preference is the Phenom 300, strikes a nice balance between practical and opulent.

[Exflyboy]

@Malkynn .. Wait, having a private plane makes you rich?.. I sold mine.. So I WAS rich, but I'm not now, even though I have more money..

I'm so confused.

I am working on increasing my 1.5% WR though...:)

I suspect not just any private plane will do. Gotta be a private jet. And not some cheap junk like an old Westwind either, you need at least a modern Citation. My personal preference is the Phenom 300, strikes a nice balance between practical and opulent.

Yes the Phenom is my best plane too. They normally fly at 45,000ft.. i.e above the airliners..:)

[nereo]

@Malkynn .. Wait, having a private plane makes you rich?.. I sold mine.. So I WAS rich, but I'm not now, even though I have more money..

I'm so confused.

I am working on increasing my 1.5% WR though...:)

I suspect not just any private plane will do. Gotta be a private jet. And not some cheap junk like an old Westwind either, you need at least a modern Citation. My personal preference is the Phenom 300, strikes a nice balance between practical and opulent.

Yes the Phenom is my best plane too. They normally fly at 45,000ft.. i.e above the airliners..:)

Ok - why is this important?  I mean, I get that the air is smoother at 30,000 feet commericial jetliners) than 5,000 feet (private prop planes), but is there a big advantage of staying at 45,000 vs 30,0000?
Genuinely curious...

[TomTX]

Ok - why is this important?  I mean, I get that the air is smoother at 30,000 feet commericial jetliners) than 5,000 feet (private prop planes), but is there a big advantage of staying at 45,000 vs 30,0000?
Genuinely curious...

Think about having another highway located 3 miles above the main highway - except with far less traffic and zero of those big semi trucks.

At least that's how I picture it.

[sol]

Yes the Phenom is my best plane too. They normally fly at 45,000ft.. i.e above the airliners..:)

Ok - why is this important? 

Pilots are a very ego-driven bunch.  They always want to fly higher and faster than everyone else in the sky. 

[nereo]

Ok - why is this important?  I mean, I get that the air is smoother at 30,000 feet commericial jetliners) than 5,000 feet (private prop planes), but is there a big advantage of staying at 45,000 vs 30,0000?
Genuinely curious...

Think about having another highway located 3 miles above the main highway - except with far less traffic and zero of those big semi trucks.

At least that's how I picture it.

Is the sky that crowded where flying higher would significantly cut down on travel time?  I was under the impression that the bottlenecks were coming in/around major airport hubs - something cruising altitude wouldn't change. 
I'm not a pilot, so I'm happy to be corrected on this assumption...

[markbike528CBX]

Yes the Phenom is my best plane too. They normally fly at 45,000ft.. i.e above the airliners..:)

Ok - why is this important? 

Pilots are a very ego-driven bunch.  They always want to fly higher and faster than everyone else in the sky.

Example: SR-71 speed check
https://m.youtube.com/watch?v=8AyHH9G9et0

[Exflyboy]

@ Nero.. My airplane cruised at 18,000 ft.

@sol.. what ego?..;)

Hehe, yeah the primary reason for flying higher in a jet is that you can fly at the same speed for less fuel burn.. I.e the airplane becomes more fuel efficient.

secondly, we pilots (hah.. I sold my airplane in 2013) like to find the altitude with the best tailwinds.. Having more altitudes to choose from helps.

Yes less congestion, although any flight above 18,000ft is automatically flown by instrument flight rules, basically means Air traffic control is navigating for you. But flying higher does give them more options to avoid congestion.

I think the Phenom flys a little slower than most airliners so having it fly higher means less chance of them having to vector airplanes of different speeds around one another.

Its also cool..:)

[pecunia]

Is the stock market flying to high on too lean a fuel to deliver the returns needed for 4 percent?

Here's an  article from a guy who says 2-3 percent are in order for the next 20 years.  That wouldn't break even with the policy of maintaining inflation at 2 percent or lower.

https://www.marketwatch.com/story/investor-credited-with-calling-the-2008-crisis-says-the-next-20-years-in-the-stock-market-will-break-a-lot-of-hearts-2019-03-07

He has a blurb in there about climate change.  The world is kind of behind where they ought to be in regards to climate change.  Could investment by governments and industry into climate change development be the stimulus that will keep the stock market values up and prove this guy wrong?  This will be a sea change (pun intended).

[nereo]

Is the stock market flying to high on too lean a fuel to deliver the returns needed for 4 percent?

Here's an  article from a guy who says 2-3 percent are in order for the next 20 years.  That wouldn't break even with the policy of maintaining inflation at 2 percent or lower.

https://www.marketwatch.com/story/investor-credited-with-calling-the-2008-crisis-says-the-next-20-years-in-the-stock-market-will-break-a-lot-of-hearts-2019-03-07

He has a blurb in there about climate change.  The world is kind of behind where they ought to be in regards to climate change.  Could investment by governments and industry into climate change development be the stimulus that will keep the stock market values up and prove this guy wrong?  This will be a sea change (pun intended).

The problem with these sorts of articles is that people (often very financially educated people) have been saying similar things for over a century.  Pick a decade and start reading OpEds in the WSJ or the NYT and you'll find lots of opinions detailing how we aren't likely to see robust future market growth going forward.  I listed a whole bunch of them oh, 10-15 pages back (but am too lazy to find again). These predictions were particularly abundant in 2009-2010, just *before* one of the longest economic expansions in US (and global) history. The dot-com bust (2001) was supposed to have sucked all the wind from the tech sector. In the 1970s we'd reached the end of 'cheap fuel' and entered a world of chronic high inflation.  The 1950s could not possibly do well because so much of the infrastructure had been destroyed.  The 1930s exposed the underbelly of the industrial revolution - it would never get better! etc. etc.

[MDM]

Is the stock market flying to high on too lean a fuel to deliver the returns needed for 4 percent?

Don't know, but it need deliver only 1.31% CAGR (and not drop so much early on that an investor's balance goes to $0) to satisfy the "last for 30 years" condition.

[robartsd]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

To be fair, an 8% withdrawal rate is not entirely unreasonable for the right investor.  Especially if he's in the last 10 years or so of life expectancy, higher withdrawal rates are the norm.

I'd say an 8% WR is good for 12 years of life expectancy with a conservative allocation. If the investment is only a supplement to other income streams (skip that cruise if the market is down), you could realistically plan on 15 years of 8% withdraw with a moderate allocation.

[rab-bit]

Just heard Dave Ramsey tell a caller to go with 8% withdrawal rate

To be fair, an 8% withdrawal rate is not entirely unreasonable for the right investor.  Especially if he's in the last 10 years or so of life expectancy, higher withdrawal rates are the norm.

I'd say an 8% WR is good for 12 years of life expectancy with a conservative allocation. If the investment is only a supplement to other income streams (skip that cruise if the market is down), you could realistically plan on 15 years of 8% withdraw with a moderate allocation.

The 8% WR would also work well for someone who only needs their stash to fund 8-12 years of retirement until other income streams (e.g. SS, pensions, paid off rentals) become available that would fully cover expenses. That's basically our plan.

[MustacheAndaHalf]

Plugging in an 8% withdrawal on Vanguard's simulator shows a 50/50 chance of going broke at 19 years.
(8% withdrawal using 60% stocks/40% bonds portfolio)
https://www.vanguard.com/nesteggcalculator

The chance of having money left starts dropping quickly after 10 years:
10 years, 97%
12 years, 89%
14 years, 78%
...

[Exflyboy]

Plugging in an 8% withdrawal on Vanguard's simulator shows a 50/50 chance of going broke at 19 years.
(8% withdrawal using 60% stocks/40% bonds portfolio)
https://www.vanguard.com/nesteggcalculator

The chance of having money left starts dropping quickly after 10 years:
10 years, 97%
12 years, 89%
14 years, 78%
...

Clearly thats why you need to invest in DR's mutual funds that average 12%.. Clearly...:(

[TomTX]

Is the stock market flying to high on too lean a fuel to deliver the returns needed for 4 percent?

Here's an  article from a guy who says 2-3 percent are in order for the next 20 years.  That wouldn't break even with the policy of maintaining inflation at 2 percent or lower.

https://www.marketwatch.com/story/investor-credited-with-calling-the-2008-crisis-says-the-next-20-years-in-the-stock-market-will-break-a-lot-of-hearts-2019-03-07

Sure, he predicted the 2008 crash. And the 2012 crash (oops). And the 2013 crash (oops). And the 2017 crash (oops). Probably others, but I can't be bothered to search more.

This is a guy who is always warning about market slowdowns/crashes/lower results going forward. If you predict bad performance every year - you're gonna be right eventually.

[pecunia]

- SNIP -

This is a guy who is always warning about market slowdowns/crashes/lower results going forward. If you predict bad performance every year - you're gonna be right eventually.

Got it - Even a broken clock is right twice a day.