Author Topic: Stop worrying about the 4% rule  (Read 347507 times)

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1250 on: November 07, 2017, 08:19:36 AM »
Similar to what ExFlyboy asked earlier (a page ago), but with a twist.  What if Retiree A and B have $1M.  Retiree A calls it quits in 2007 and withdraws his inflation adjusted $40k for 30 years.  Retiree B hangs in a little longer only to suffer the ~37% decline in 2008.   Retiree A has roughly 605k and Retiree B has roughly 630k. 

How much can Retiree B plan to spend for the next 30 years?

So is there a consensus on how much Retiree B can spend?  I've heard the strict interpretation of the 4% Rule = $25,200 (inflation adjusted) for the next 30 years and also heard 'something closer to $40,800, since that what Retiree A can spend'.  There is a pretty big difference between those answers, and a whole lot of handwaving around 'being flexible' doesn't really help Retiree B know what to do.

I think the answer in terms of the 4% rule is that *in the past* it has worked out 96% of the time if a person with that amount of stash spent 4% of the balance of that stash each year.   

The 4% rule isn't really a prediction, it is a statement about what has happened before.  Now if you want to use Person A's conditions to determine Person B's spending, the fact is that even Person A's plan isn't looking too great now.  Even though they followed the 4% rule properly, the fact is that even the historical model shows that it does fail sometimes (4% of the time during the historical period).  The new information that we now have - the large market drop one year into Person A's retirement) now means that we have more information to plug into that historical model to see how he *would have done* in the past.  You would have to look at the subset of periods in which a similar market drop occurred right after a person retired. He might still be fine, both in the past model and in the future reality.  It would now be the role of the thinking rational human being to look at all of the available information and re-evaluate. 

The 4% rule is kind of an anchor point that gives us a model of the best information we currently have about how market performance and withdrawal rates ultimately affect a retirement plan.  We can look at all of the historical circumstances such as the great depression, the tech bubble crash, the inflationary 70's, the crappy stock market returns of the late 60's - early 70's and use that knowledge to help us put a confidence level on our historical model. 

No matter what cFireSim tells you when you plug in your numbers, you might still run out of money.  Even if you use 2% instead of 4%, you might run out of money.  Because no one can predict the future. 

But it's a trade-off.  Running out of money is one kind of failure.  Dying one year into your retirement is another kind of failure.  Having a long retirement of worrying about money and not travelling to see your family or not enjoying your life but then leaving a million bucks in the bank when you kick off is another kind of failure. We all have to use our own judgment and our own priorities to determine where we feel comfortable.

in the given scenario if 100% of assets were invested in VTSAX both could have withdrawn 40k per year adjsuted up at 3% per year for much higher than inflation withdrawals and been left today sitting with 1.3MM and 1.4MM ... so with the added data that has been proposed from the future in this situation it is currently further proving the safety of the 4% swr regardless of the huge hit you took in year one.  when a normal human would likely cut some spending or earn some extra income.

Exflyboy

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Re: Stop worrying about the 4% rule
« Reply #1251 on: November 07, 2017, 10:52:43 AM »
It is interesting to me that as a group we tend to worry about the "running out of money" type of failure. I think we see this kind of thinking because to savers are are wired that way.

Now I have family members who are broke, will never retire and the thought of ROM failure doesn't even enter their heads.... "Oh retirement, that's what that Social Security thing is for right?". Of course they are head directly for a ROM type of failure BEFORE they FIRE. A path I don't want to be on.

The challenge to us worriers (and yes I am one) is to learn to be comfortable spending our allocation after a lifetime of saving. I am attempting to do this by being comfortable blowing 3%.. As in blowing it and not giving a second thought.

Sounds easy, but when it comes to paying for unsubsidised Health care I immediately "optimise" and go for the max subsidy, i.e spend way less.

Its a disease I tell ya..:)

Anon in Alaska

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Re: Stop worrying about the 4% rule
« Reply #1252 on: December 25, 2017, 09:18:41 PM »
Has anyone done the math based on monthly withdrawals? Suppose I retire and withdraw tomorrow. I don't need to draw out 4% right away, I only need to draw out a months worth, or 1/12 of 4% or 0.33%. That would mean that the other 3.67% would be earning for me for another 1-11 months.
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matchewed

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Re: Stop worrying about the 4% rule
« Reply #1253 on: December 26, 2017, 07:25:24 AM »
Has anyone done the math based on monthly withdrawals? Suppose I retire and withdraw tomorrow. I don't need to draw out 4% right away, I only need to draw out a months worth, or 1/12 of 4% or 0.33%. That would mean that the other 3.67% would be earning for me for another 1-11 months.

That is a strategy I guess but would generate a great deal of transactions. Also if your plan relies on trying to ensure that everything but what you spend is actively in some market maybe your plan isn't flexible enough.

A much more common strategy would be to have some cash or easily available position that you can access and rely on in a downturn. One which allows you to fill that cash or cash alternative position with the other funds when the market recovers. That position would be based on your risk tolerance and historical recovery periods.

In short I don't think anyone has done that math on such a granular level as given the above I'm not sure it's a solid strategy.

TempusFugit

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Re: Stop worrying about the 4% rule
« Reply #1254 on: December 26, 2017, 08:17:47 AM »
Has anyone done the math based on monthly withdrawals? Suppose I retire and withdraw tomorrow. I don't need to draw out 4% right away, I only need to draw out a months worth, or 1/12 of 4% or 0.33%. That would mean that the other 3.67% would be earning for me for another 1-11 months.

I suspect that if you did this it wouldn't really change anything.  It would all even out. 

As a practical matter, monthly withdrawals would probably be difficult, since things like dividend payments are quarterly or annual.  It would depend upon the investment vehicle in which your money was stashed. 

SwordGuy

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Re: Stop worrying about the 4% rule
« Reply #1255 on: December 26, 2017, 09:26:17 AM »
Has anyone done the math based on monthly withdrawals? Suppose I retire and withdraw tomorrow. I don't need to draw out 4% right away, I only need to draw out a months worth, or 1/12 of 4% or 0.33%. That would mean that the other 3.67% would be earning for me for another 1-11 months.

You are correct.  You will get a difference.  If the market is going up, it will be in your favor.  If down, then not. 

The thing that would gum it up would be transaction costs.   So as long as they aren't odious, all should be well.

Dividends, that someone else mentioned, aren't a problem.  You'll get more of them by having more money in the market longer.

Anon in Alaska

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Re: Stop worrying about the 4% rule
« Reply #1256 on: December 27, 2017, 06:19:25 AM »
Has anyone done the math based on monthly withdrawals? Suppose I retire and withdraw tomorrow. I don't need to draw out 4% right away, I only need to draw out a months worth, or 1/12 of 4% or 0.33%. That would mean that the other 3.67% would be earning for me for another 1-11 months.

That is a strategy I guess but would generate a great deal of transactions. Also if your plan relies on trying to ensure that everything but what you spend is actively in some market maybe your plan isn't flexible enough.

Twelve transactions a year does not seem like a lot to me. I'm currently buying more than 12 times a year; I'm not sure why selling 12 times a year would be any different.

Flexible is good. Earning money for me until I need it is also good.
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Anon in Alaska

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Re: Stop worrying about the 4% rule
« Reply #1257 on: December 27, 2017, 06:32:07 AM »
Has anyone done the math based on monthly withdrawals? Suppose I retire and withdraw tomorrow. I don't need to draw out 4% right away, I only need to draw out a months worth, or 1/12 of 4% or 0.33%. That would mean that the other 3.67% would be earning for me for another 1-11 months.

I suspect that if you did this it wouldn't really change anything.  It would all even out. 


Lets say I'm earning 7% per year. If I keep my money invested for an extra 0-12 (mean 6) months than I'm going to earn an extra 3.5% on that 4% a year I'm spending. (The market isn't that smooth of course, I'm simplifying.) Suppose I had $500,000. I retire, withdraw the $20,000 I need for the first year, and at the end of that year I have $513,600 (480,000 x 1.07). If I keep that $20,000 invested until I need it, and draw it out once a month, I'm going to have an extra $700 at the end of the year (0.07/2 x 20,000)). My investments will have earned $34,300, not $33,600. Why wouldn't I want this?

Oh sure if the market is going down I'll be a little worse off but you can't time the market and it goes up more than it goes down, so this should work most of the time, right?

I just need to have my money invested in something where my transactions cost is low enough that it would be less than $700/year for an extra 11 transactions. I do.

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matchewed

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Re: Stop worrying about the 4% rule
« Reply #1258 on: December 27, 2017, 06:42:46 AM »
Because a $400 difference in investment return over the course of a year is indistinguishable from noise. It's not about wanting it, the statement was that you probably wouldn't notice a difference. So more effort for an indistinguishable from normal fluctuation gain doesn't seem like something that is a large enough impact to chase.

TomTX

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Re: Stop worrying about the 4% rule
« Reply #1259 on: December 27, 2017, 10:07:58 AM »
I just need to have my money invested in something where my transactions cost is low enough that it would be less than $700/year for an extra 11 transactions. I do.

Yeah, I don't see why transaction cost should be a barrier. Example:

If you have $100k (trailing 3 month average) combined between Merrill Edge and Bank of America - you get 100 free stock or ETF trades every month and zero fees.  Put your money in VTI (or whatever ETFs you want).

Withdrawing monthly costs nothing.

Hell, I could make my withdrawals 3 times a DAY and pay nothing for transaction costs.
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secondcor521

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Re: Stop worrying about the 4% rule
« Reply #1260 on: December 27, 2017, 10:52:39 AM »
It's not the transaction costs, it's the hassle factor.  FIRE people get lazy quickly.  But if it's worth the hassle to you, knock yourself out.

I will point out that a quick calculation suggests that moving maybe 2% of that hypothetical $500K from bonds to stocks - i.e., a very slightly riskier asset allocation - gets you that same $700 per year with a lot less hassle.

But yeah, the principle of moving money monthly instead of yearly is sound.  Again, just the hassle factor.
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Livewell

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Re: Stop worrying about the 4% rule
« Reply #1261 on: December 27, 2017, 03:27:56 PM »
The challenge to us worriers (and yes I am one) is to learn to be comfortable spending our allocation after a lifetime of saving. I am attempting to do this by being comfortable blowing 3%.. As in blowing it and not giving a second thought.

Sounds easy, but when it comes to paying for unsubsidised Health care I immediately "optimise" and go for the max subsidy, i.e spend way less.


I look at this as an experiment to prove out your risk profile.  Conservative and youíll want to bake in every possibility  and spend as little as possible.  I think there is a danger in doing this.  Not that saving and planning is bad, they are required, but at some point you have to trust that things will work out. 

For my journey, first it was accepting that my target needed to be higher because I preferred to be married and I needed to compromise with my wife!  That was tough because itís added years to my career.  However those years have been much better than I thought and after much thought Iím fine with 4.5% because we do spend a decent amount (which could be cut back) and we do live in a HCOL area (and can relocate if needed).

The point is all my initial worrying has proven unnecessary, and while I am not yet FIRE, I can see why itís likely to be just fine later.  There is a point of over engineering with this stuff, and itís a good thing to challenge yourself around that every so often.

EscapeVelocity2020

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Re: Stop worrying about the 4% rule
« Reply #1262 on: December 27, 2017, 11:19:49 PM »
Has anyone done the math based on monthly withdrawals? Suppose I retire and withdraw tomorrow. I don't need to draw out 4% right away, I only need to draw out a months worth, or 1/12 of 4% or 0.33%. That would mean that the other 3.67% would be earning for me for another 1-11 months.

That is a strategy I guess but would generate a great deal of transactions. Also if your plan relies on trying to ensure that everything but what you spend is actively in some market maybe your plan isn't flexible enough.

A much more common strategy would be to have some cash or easily available position that you can access and rely on in a downturn. One which allows you to fill that cash or cash alternative position with the other funds when the market recovers. That position would be based on your risk tolerance and historical recovery periods.

In short I don't think anyone has done that math on such a granular level as given the above I'm not sure it's a solid strategy.

OK, I cannot resist.  If your strategy hinges on such a negligible advantage, then you are working way too hard.

Honestly, on a forum like Bogleheads or ER.org, you'd be laughed at for needing to sit in front of your computer so much to squeeze out such a small gain.  And, as others have pointed out, it is not always a straightforward win - it's not like the market is linear and you just do this for the first few years.  In order to benefit from the market average, you need to put in 30 years...  So yes, if it is worth it to you to try to make more transactions and ultimately benefit from the added tax paperwork and playing this game, then go for it.  It neither sounds fun nor educational, so I'll stick to annual withdrawals and enjoy the added free time to peruse optimal health or business opportunities.

Ultimately, as human beings, time is the final limiting factor.  Don't trade it away for vanishing gains.
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Roothy

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Re: Stop worrying about the 4% rule
« Reply #1263 on: December 28, 2017, 03:47:01 PM »
Most places will let you automatically withdraw a fixed amount every month, so no need for it to be a hassle.  For an extra few hundred bucks a year, absolutely worth it.  I certainly plan to do this. 

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Re: Stop worrying about the 4% rule
« Reply #1264 on: December 28, 2017, 03:53:38 PM »
Has anyone done the math based on monthly withdrawals? Suppose I retire and withdraw tomorrow. I don't need to draw out 4% right away, I only need to draw out a months worth, or 1/12 of 4% or 0.33%. That would mean that the other 3.67% would be earning for me for another 1-11 months.

And as for whether anyone has done this math, earlyretirementnow has: https://earlyretirementnow.com/2017/01/25/the-ultimate-guide-to-safe-withdrawal-rates-part-7-toolbox/

Their version of the Trinity Study not only has withdrawals happening monthly,  but their historical returns are also monthly.

Classical_Liberal

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Re: Stop worrying about the 4% rule
« Reply #1265 on: December 28, 2017, 07:17:25 PM »
Regarding monthly withdrawals.

There are entire threads on this forum devoted to making a few hundred a year on CC bonuses.  Some people here enjoy this type of thing, its what differentiates MMM from Bogleheads.  So I see no reason to criticize this approach for that particular reason.

Essentially its the same as lump sum vs dollar cost averaging.  Lump sum is better, because equities go up more often than they go down.  I can see this strategy increasing wealth in the "good times", maybe working OK in period of high inflation, but likely working in reverse for periods of fast, temporary, 1-3 year, down turns. 

I think its important to ask a question though.  Is the rate of portfolio failures the most important thing to consider in withdrawal strategy.  Example(s), a strategy with a 10% failure rate, in which half of those failures occur more than 10 years before predicted life expectancy.  A withdraw strategy with 15% failure, but there are no failures before 2 years of projected life expectancy.  Which is the stronger strategy? 

IMO It's just as important to see how (and by how much) a portfolio & WR fails, as it is to see how often is fails.

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1266 on: December 28, 2017, 07:31:23 PM »
Imo a plan failing within 2 years of 40 or 10 years of 40 isn't relevant bc most will need 50-80+ years of withdrawals.

Classical_Liberal

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Re: Stop worrying about the 4% rule
« Reply #1267 on: December 28, 2017, 07:39:22 PM »
Imo a plan failing within 2 years of 40 or 10 years of 40 isn't relevant bc most will need 50-80+ years of withdrawals.

I didn't specify 40 years, but in fairness, it is in the general range I was thinking.  While I appreciate your optimism; the reality of life expediencies are a bit different.  Unless someone FIRE's several years before conception an 80yr span is probably not needed, nor is it a statistically significant difference from a perpetual WR.

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1268 on: December 28, 2017, 08:02:53 PM »
Imo a plan failing within 2 years of 40 or 10 years of 40 isn't relevant bc most will need 50-80+ years of withdrawals.

I didn't specify 40 years, but in fairness, it is in the general range I was thinking.  While I appreciate your optimism; the reality of life expediencies are a bit different.  Unless someone FIRE's several years before conception an 80yr span is probably not needed, nor is it a statistically significant difference from a perpetual WR.

Correct. 40 years is greatly determined to mean money should last bear indefinitely if it makes it there. But my point was. Why do I care if I ran out at 30 years vs 38 years it still failed and didn't support me and I had to change my plan to make something else happen.

And I think it's shortsighted to plan based on current life expectancy. They keep rising at least for the healthy non drug users.

Classical_Liberal

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Re: Stop worrying about the 4% rule
« Reply #1269 on: December 28, 2017, 08:25:02 PM »
Correct. 40 years is greatly determined to mean money should last bear indefinitely if it makes it there. But my point was. Why do I care if I ran out at 30 years vs 38 years it still failed and didn't support me and I had to change my plan to make something else happen.

Good question!

If all of my historical failures are only coming up short 10-50K, I'm much more confident in my ability to make minor course corrections to rectify minor short falls as I see them materializing.  If I have several failures coming up multiple hundreds of thousands short, it becomes more difficult to correct. I would also argue that it becomes increasingly difficult to correct for shortfalls(at least through income) after a certain age.

There is a notable difference between 30-40 years and perpetual, almost nonexistent at 80 years vs perpetual.

And I think it's shortsighted to plan based on current life expectancy. They keep rising at least for the healthy non drug users.

Touche.  However, keep in mind, making it to 80-90 is lucky (or skilled) enough.  Making to that age and still enjoying a reasonable active and healthy life, much less likely.  Everyone has an anecdote of their great aunt who is 100 and still walks miles to the grocery store every day; but that is a far, far outlier.  I hope its you and I, but it probably wont be, so I'm not willing to risk quality life now on that assumption.  Much like the likelihood of dying vs running out of money graphs up thread show.
« Last Edit: December 28, 2017, 08:27:44 PM by Classical_Liberal »

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1270 on: December 29, 2017, 05:39:17 AM »
All of my grandparents and great aunts and uncles are living well into there late 80s still active and all of them are making into the 90s still living. So it's much more likely for me to need to plan on that. Esp as medical advances continue.

Daisy

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Re: Stop worrying about the 4% rule
« Reply #1271 on: December 29, 2017, 10:17:56 AM »
All of my grandparents and great aunts and uncles are living well into there late 80s still active and all of them are making into the 90s still living. So it's much more likely for me to need to plan on that. Esp as medical advances continue.

I have this same "problem".

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1272 on: December 29, 2017, 10:28:25 AM »
I have this same "problem".

I do as well, but I've noticed my parents [divorced - living apart] now in their 90's haven't spent hardly any money in a couple decades. So if I get through the early sequence of returns risk, end up paying off my mortgage and getting gov't benefits those later years don't particularly worry me from a financial perspective.

Anon in Alaska

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Re: Stop worrying about the 4% rule
« Reply #1273 on: December 30, 2017, 05:44:05 AM »

I will point out that a quick calculation suggests that moving maybe 2% of that hypothetical $500K from bonds to stocks - i.e., a very slightly riskier asset allocation - gets you that same $700 per year with a lot less hassle.

But yeah, the principle of moving money monthly instead of yearly is sound.  Again, just the hassle factor.

If I'm earning 7%, then I'm already in stocks. I'm 51, I don't have time to take the non-risky strategy. If it fails, it fails and I get a part time job or start collecting Social Security early. If it doesn't fail then I get to retire before I'm dead.
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boarder42

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Re: Stop worrying about the 4% rule
« Reply #1274 on: December 30, 2017, 05:55:31 AM »
I have this same "problem".

I do as well, but I've noticed my parents [divorced - living apart] now in their 90's haven't spent hardly any money in a couple decades. So if I get through the early sequence of returns risk, end up paying off my mortgage and getting gov't benefits those later years don't particularly worry me from a financial perspective.

That's probably true none of our calcs include ssa or Medicare.

Classical_Liberal

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Re: Stop worrying about the 4% rule
« Reply #1275 on: December 30, 2017, 08:41:52 AM »
I have this same "problem".

I do as well, but I've noticed my parents [divorced - living apart] now in their 90's haven't spent hardly any money in a couple decades. So if I get through the early sequence of returns risk, end up paying off my mortgage and getting gov't benefits those later years don't particularly worry me from a financial perspective.

That's probably true none of our calcs include ssa or Medicare.

To put that into perspective 22% of all retirees in the US live on SS alone.  So your plan doesn't even include what nearly a quarter of folks are completely reliant upon.

I currently live off an amount just over my anticipated full SS, without additional contributions. Even if benefits get cut in half my WR drops to nearly half at 67...and I don't even count it!  To think, many think this forums calculations aren't conservative enough?

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1276 on: December 30, 2017, 09:38:10 AM »
I have this same "problem".

I do as well, but I've noticed my parents [divorced - living apart] now in their 90's haven't spent hardly any money in a couple decades. So if I get through the early sequence of returns risk, end up paying off my mortgage and getting gov't benefits those later years don't particularly worry me from a financial perspective.

That's probably true none of our calcs include ssa or Medicare.

To put that into perspective 22% of all retirees in the US live on SS alone.  So your plan doesn't even include what nearly a quarter of folks are completely reliant upon.

I currently live off an amount just over my anticipated full SS, without additional contributions. Even if benefits get cut in half my WR drops to nearly half at 67...and I don't even count it!  To think, many think this forums calculations aren't conservative enough?

Oh yeah I know we're going to have way more than we need. We aren't counting the govt or inheritances. So we could likely quit a couple years earlier if we could quantify these 2 things and know around what we could expect. But I can see ssa and Medicare being done away with for the wealthy or those like around here who have large staches.

One of the largest risks to FIRE is working longer than necessary. We don't ever really discuss it. Bc what's omy when you made it already for some extra padding.

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1277 on: December 30, 2017, 09:54:40 AM »
One of the largest risks to FIRE is working longer than necessary. We don't ever really discuss it. Bc what's omy when you made it already for some extra padding.

Well I promise you I will not be working a regular job if my stash were to get to 4%WR. I doubt I'll even make it there before I pull the plug. I'm waiting to cross 5%WR and then start to look at specific exit strategies so I am out before or on 4%WR.

Classical_Liberal

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Re: Stop worrying about the 4% rule
« Reply #1278 on: December 30, 2017, 10:22:07 AM »
One of the largest risks to FIRE is working longer than necessary. We don't ever really discuss it. Bc what's omy when you made it already for some extra padding.

Well I promise you I will not be working a regular job if my stash were to get to 4%WR. I doubt I'll even make it there before I pull the plug. I'm waiting to cross 5%WR and then start to look at specific exit strategies so I am out before or on 4%WR.

Agreed!

It could be that it was the best year of your life... Which never happened because it was instead spent working a mediocre, high-paying job.  Even if you actually do live to a healthy 100, how many years are left?  If I lost a random year of my life, depending on winch year it was (the best have been self-directed), l would have really missed out!

PizzaSteve

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Re: Stop worrying about the 4% rule
« Reply #1279 on: January 01, 2018, 09:19:55 AM »
One of the largest risks to FIRE is working longer than necessary. We don't ever really discuss it. Bc what's omy when you made it already for some extra padding.

Well I promise you I will not be working a regular job if my stash were to get to 4%WR. I doubt I'll even make it there before I pull the plug. I'm waiting to cross 5%WR and then start to look at specific exit strategies so I am out before or on 4%WR.

Agreed!

It could be that it was the best year of your life... Which never happened because it was instead spent working a mediocre, high-paying job.  Even if you actually do live to a healthy 100, how many years are left?  If I lost a random year of my life, depending on winch year it was (the best have been self-directed), l would have really missed out!
Its all a philosophical perspective.

If we sincerely believe that working and living your life under our current circumstances is 'losing/wasting a year of your life' (regardless of our financial status) then we should actually consider quitting immediately IMHO. 

Work has many purposes.  Your life includes many hours that are not at your desk or field work location.  I think we should all try to honor our life choices, and while planning for the futue, also enjoy our life in every moment. 

One assumes that most of us picked a profession with some notion or passion for something enjoyable or meaningful.  I assume we are in our situation based on ideas of what we wanted to do with our life, whether it is have kids, marry, life a particular place, buy a car or home, how we wanted to contribute to society, etc. 

Dismissing all those choices as wasted time makes me somewhat sad for that person.  It comes accross as a person who would be dissatisfied with their life regardless of net worth.  Anything short of some imagined perfect FIRD life is wasted...sort of like the 'princess syndrome' likeon those Bridezilla TV shows.  These brides so obsessed with planning the perfect wedding that they forget to enjoy the moment, love their spouse, contemplate married life, appretiate their guests, etc.

Working a job should be what you chose to do and the income should be appretiated for what it is.  I think it is disrespectful to criticize those who work past 4% as wasting time.

PS, that point is meant to encourge gratitude in rhetoric, not to encourge over saving.  The encouragement to FIRE once one has enough is good work.
« Last Edit: January 01, 2018, 10:08:24 AM by PizzaSteve »
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Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1280 on: January 01, 2018, 09:55:36 AM »
I think it is disrespectful to criticize thise who work past 4% as wasting time.



I think calling out OMY syndrome is one of the great public services of this site along with the simple math behind the 4% rule, etc... People are programmed almost from birth to take their place on the pointy end of the economic plow and generate financial value for society. To even think a person subjected to decades of what is effectively mind control and programming is making a rational choice to keep working is a suspect proposition in my mind. At the very least pointing out the opportunity to stop working at very safe levels of risk and potentially saving someone from giving up some of their precious remaining time on the planet to work is not unreasonable on this site where face punches are given for all sorts of things.

It's like the prisoner who can't leave their cell despite the door being unlocked and ajar. If you've been at the coal face for many decades do you even have the perspective to appreciate what you are giving up?

For those of us who are not retiring in their 30's it's even more important to actually take the leap to FIRE and see what's on the other side. Let's just assume there is some awesome stuff to do beyond working trading those next few years for more money past a certain point makes less and less sense.

We basically only talk about the risk of running out of money in retirement, but there a bunch more likely risks that working longer does not mitigate and in most cases exacerbates:

- poor health [sedentary computer work is the cigarette of our generation]
- damage relationships [the journal section highlights the impact of a divorce just as you are reaching the finish line]
- dying earlier than you expected [I love Maizeman's charts for illustrating the risk of dying vs. running out of money]

Ultimately as long as it's not mean spirited or cruel having your spending/investing/retirement plan choices critiqued is a primary focus of this forum and one that I appreciate a lot.
« Last Edit: January 02, 2018, 10:35:38 AM by Retire-Canada »

TomTX

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Re: Stop worrying about the 4% rule
« Reply #1281 on: January 01, 2018, 02:39:01 PM »
  I think it is disrespectful to criticize those who work past 4% as wasting time.

And I think it's incredibly disrespectful to try to stop honest debate and criticism of your positions when participating in a public discussion forum. It's also intellectually dishonest.

Finally, it's incredibly hypocritical for you to criticize others opinions when you demand your own stand unanswered. Practice what you preach.

(for those confused, see PizzaSteve's .sig )
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sol

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Re: Stop worrying about the 4% rule
« Reply #1282 on: January 01, 2018, 02:55:40 PM »
Finally, it's incredibly hypocritical for you to criticize others opinions when you demand your own stand unanswered. Practice what you preach.

(for those confused, see PizzaSteve's .sig )

This has been a continuous problem with PizzaSteve.  He has strong and well-voiced opinions, which I am grateful that he shares, but he then refuses to engage with anyone even after calling them out.  It's like he wants to write, but he doesn't want anyone to read.

Better to just locate that "block poster" button, then he can write all he wants and nobody has to know. 

Classical_Liberal

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Re: Stop worrying about the 4% rule
« Reply #1283 on: January 01, 2018, 02:58:22 PM »
A happiness/fulfillment thread may be best to continue this particular discussion.  However, from a 4% rule standpoint, it's important for a causal or new reader to understand; working past 25% expenses has sigmoid function diminishing returns from a monetary standpoint.

From a happiness, personal fulfillment, or even "keeping score" standpoint, arguments can be made to continue work.  Heck, many people thrive in more controlled daily environments, there is nothing inherently wrong with that personality.  I would caution though, if you have 25X expenses (I would even argue basic necessity expenses), ask this question.  Would you go to work for free?  Not some modified form of your job, exactly what you do now. 

If the answer to that question is "no"; my (nondebating) opinion... I think making some changes in life are in order.  That may mean trying to change your current job, getting a new one, or venturing into something more self-directed.   Life is short, time on earth is scarce, your money(at this level) is not. 

I also wholeheartedly agree this forum needs to provide a counterpoint to the fear based conditioning @ Retire-Canada has pointed out above.




nereo

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Re: Stop worrying about the 4% rule
« Reply #1284 on: January 02, 2018, 10:33:12 AM »
Finally, it's incredibly hypocritical for you to criticize others opinions when you demand your own stand unanswered. Practice what you preach.

(for those confused, see PizzaSteve's .sig )

This has been a continuous problem with PizzaSteve.  He has strong and well-voiced opinions, which I am grateful that he shares, but he then refuses to engage with anyone even after calling them out.  It's like he wants to write, but he doesn't want anyone to read.

Better to just locate that "block poster" button, then he can write all he wants and nobody has to know.
I will admit to working on this Sol, but not wanting to argue and avoiding personal attacks is different from accepting that someone has a contrary view.

When people form their writing in terms like, `I disagree, my view is X' I will engage.  When they say 'You are wrong to have your view followed by isukts and personal attacks, I dont want to engage.

For example you just fired off a generalized personal attack, which you sometimes do.  And while you are obviously very intelligent with views I mostly agree with, your style of doing that puts me off wanting to debate with you.

Its that simple.  So yes, I would prefer you stop talking about me in that way.  If you want to pkace me oin ignore and stop talking to or about me, that us fine...yet here you are talking about me in public, yet again.

@ PizzaSteve -
I think what's left me scratching my head is where you say that you don't even want to debate or discuss points being made. Debate is a prime reason I post here and I suspect that's true for many others. I'm not afraid to admit that I've altered my initial opinion and on occasion even had my initial 'facts' been proven wrong by a few posters here.  It reduces my confirmation bias and has helped me learn a great deal. Other times I've learned a great deal about how others outside my field of science are misinterpreting information, which is valuable information to have because it shows where communication has broken down.

I speak of course of this portion of your signature:
Quote
In the event of a post, no need to reply or quote if you disagree. I am posting information meant to stand on its own and hope to avoid back and forth debating.

Sure, if someone calls me an asshat* I do my best to ignore and move on. But if they're giving me a well reasoned and researched counter-opinion, i'm far more likely to pay attention.

*interestingly, one person who call me an asshat in one thread has also provided me with several detailed responses to questions in other threads.  Just one of many reasons why I try not to use the "ignore" function unless the person is a troll thru-and-thru.
« Last Edit: January 02, 2018, 11:32:45 AM by nereo »
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Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1285 on: January 02, 2018, 10:34:08 AM »
I will admit to working on this Sol, but not wanting to argue and avoiding personal attacks is different from accepting that someone has a contrary view.

So either participate in the discussion or just lurk. Nobody is forcing you to post and run. You seem to want your cake and eat it too. That's bad manners.

As an example there is a FI forum that I read, but for various reasons don't want to get into shit with people there so I don't sign in to an account there and I just read content that interests me. When I see something I don't agree with or want to comment on there is no post/reply button since I am not signed in and that reminds I am just a lurker.


sol

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Re: Stop worrying about the 4% rule
« Reply #1286 on: January 02, 2018, 10:38:45 AM »
Here you are talking about me in public, yet again, after i asked you not to, I thought somewhat politely.

I talk to you because I want you to be an active and involved member of the community.  You clearly have a lot to say.  Please say it!

But with that privilege comes the responsibility to weather criticism of your ideas.  When I post the forum I fully expect someone out there will think me a moron, and post a rebuttal.  Great!  I can ignore it, or I can defend my ideas.  What I cannot do is try to belittle and shame anyone in an attempt to prevent them from doing the same thing that I am doing.  Because I can post, you can post.  Because I express opinions, I have to accept that other people are allowed (encouraged!) to express their differing opinions.

Consider adopting this same kind of reciprocity.  By virtue of your very participation in the forum, I don't think you get to tell anyone else what they can or cannot say.  Your .sig is not only silly, it seems antithetical to everything the internet is about.  You might as well rephrase it to say "I am right and everyone else needs to shut up." 

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1287 on: January 02, 2018, 10:44:46 AM »
Your .sig is not only silly, it seems antithetical to everything the internet is about.  You might as well rephrase it to say "I am right and everyone else needs to shut up."

Agreed it's fucking ludicrous to say "I'm going post why you are wrong or I disagree, but please don't quote me or reply with why you disagree. My post is that last damn word on the topic." ;)


PizzaSteve

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Re: Stop worrying about the 4% rule
« Reply #1288 on: January 02, 2018, 10:52:55 AM »
removed as off topic...feel free to clean up thread of off topic posts.  i feel it is for the best of the thread in general.
« Last Edit: January 02, 2018, 12:02:16 PM by PizzaSteve »
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brooklynguy

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Re: Stop worrying about the 4% rule
« Reply #1289 on: January 02, 2018, 10:56:36 AM »
But I get it...you successfully shut me up.  I will go away.

I don't think you do get it, because this is the polar opposite of the point that was made.

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1290 on: January 02, 2018, 10:58:23 AM »
But I get it...you successfully shut me up.  I will go away.

You passive aggressive BS gets really old. You are the one creating this drama. You could just participate in the forum normally like the rest of us. Nobody is telling you to shut up.

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1291 on: January 02, 2018, 11:29:55 AM »
But I get it...you successfully shut me up.  I will go away.

You passive aggressive BS gets really old. You are the one creating this drama. You could just participate in the forum normally like the rest of us. Nobody is telling you to shut up.

yep dont know how you can read everything posted above and get that you should shutup.  Maybe i should post some of the PM's i've received that go deeply into personal attacks.  often followed by a PM stating to ignore it b/c you're leaving the site.

Participate and have fun conversations with very intelligent people who see the world differently and be open to changing your view - i'm very hard headed but have changed many of my views on countless things here. 

As @nereo said debate is one of the reasons many choose to frequent these forums.  B/c it may alter our view points, or allow us to defend a view the common cattle think in the US cant grasp without more indepth and thought out data.   

sol

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Re: Stop worrying about the 4% rule
« Reply #1292 on: January 02, 2018, 12:22:37 PM »
But I get it...you successfully shut me up.  I will go away.

You passive aggressive BS gets really old. You are the one creating this drama. You could just participate in the forum normally like the rest of us. Nobody is telling you to shut up.
No, Sol started the drama with a comment aimed at me.  But again, feel free to clean up the thread.  I will delete my off topic posts.

You need to be right so badly, you feel obligated to twist words.  It has nothing to do with the 4% rule for Sol to insult me or comment on my sig.  To say I started the drama is false.

Please elaborate!  I welcome the scrutiny.

Technically, I think it was TomTX who called you out, this time.  I responded to him, not you, and then you jumped on me.  Which is your right, but I think it's inaccurate to label me as the instigator this time.

(Please note this is also not an attempt to shut you up, nor a personal attack.)

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1293 on: January 02, 2018, 12:24:42 PM »
But I get it...you successfully shut me up.  I will go away.

You passive aggressive BS gets really old. You are the one creating this drama. You could just participate in the forum normally like the rest of us. Nobody is telling you to shut up.
No, Sol started the drama with a comment aimed at me.  But again, feel free to clean up the thread.  I will delete my off topic posts.

You need to be right so badly, you feel obligated to twist words.  It has nothing to do with the 4% rule for Sol to insult me or comment on my sig.  To say I started the drama is false.

yet again you completely missed the point.

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1294 on: January 02, 2018, 12:25:35 PM »
To say I started the drama is false.

I didn't say you started this particular incident in the longer saga that is your odd relationship with participating in this forum. I said you are creating the drama...in other words you are the root cause of the stuff that seems to make you unhappy. That also means you can change the situation.

TomTX

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Re: Stop worrying about the 4% rule
« Reply #1295 on: January 05, 2018, 04:44:34 PM »
But I get it...you successfully shut me up.  I will go away.

You passive aggressive BS gets really old. You are the one creating this drama. You could just participate in the forum normally like the rest of us. Nobody is telling you to shut up.
No, Sol started the drama with a comment aimed at me.  But again, feel free to clean up the thread.  I will delete my off topic posts.

You need to be right so badly, you feel obligated to twist words.  It has nothing to do with the 4% rule for Sol to insult me or comment on my sig.  To say I started the drama is false.

Nope.  Not sol.

I made a comment based on your opinion expressed, using the style you expressed it in - and aiming at your ridiculous "I get the last word!!!1111" signature block.

Your response was disingenuous and inaccurate. Your .sig doesn't ask people to avoid personal attacks, it tells people not to argue the substance you put forth.

Even biblical scripture gets debated, PizzaSteve.

If you didn't want to debate, you would let others' opinions stand when they respond to something you post. You get your say, they get theirs. But (as demonstrated in this thread) you seem incapable of doing so. Which is hypocritical. Which is what I pointed out.

Deleting all your posts in a huff post-facto doesn't count, btw.
« Last Edit: January 05, 2018, 04:47:07 PM by TomTX »
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Mr. Green

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Re: Stop worrying about the 4% rule
« Reply #1296 on: January 10, 2018, 08:10:39 AM »
Work has many purposes.  Your life includes many hours that are not at your desk or field work location.  I think we should all try to honor our life choices, and while planning for the futue, also enjoy our life in every moment. 

One assumes that most of us picked a profession with some notion or passion for something enjoyable or meaningful.  I assume we are in our situation based on ideas of what we wanted to do with our life, whether it is have kids, marry, life a particular place, buy a car or home, how we wanted to contribute to society, etc. 
I think your assumption does not reflect reality. Surveys have shown for many years that the majority of people in America are dissatisfied with their jobs. They do it for the money and the stability. So it kinda makes sense that if those people suddenly found themselves in a stable situation where they no longer needed the money (FIRE) that they would choose to do something else. However, most people cannot grasp the concept, just like most people can't choose to delay gratification. So the working reality becomes ingrained until eventually, you can't even imagine what life would be like without working. Those are the people that die early when they do stop working in their 60's, because they end up lost, feeling like they have no purpose. Borrowing a line from The Shawshank Redemption, "They're institutionalized."
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AdrianC

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Re: Stop worrying about the 4% rule
« Reply #1297 on: January 11, 2018, 08:26:10 AM »
"Insights on Using the 4% Withdrawal Rule From Its Creator" [William Bengen]

http://www.aaii.com/journal/article/insights-on-using-the-withdrawal-rule-from-its-creator

CR: Originally, in your 1994 study, “Determining Withdrawal Rates Using Historical Data,” (Journal of Financial Planning, October 1994), you used a 4% withdrawal rate. What prompted you to increase the withdrawal rate to 4.5%?

WB: I included more asset classes.

Originally, I only worked with two asset classes. I used U.S. large-company stocks and U.S. intermediate-term government bonds. I then added small-cap stocks. The small-cap stocks added enough of a boost in terms of return to allow the withdrawal rate to be increased.

It was originally around 4.2%, actually. Including small-cap stocks raised it a little bit to about 4.5%. This shows you the importance of having a diversified portfolio during retirement.


I thought this comment was also interesting:

WB: A couple of years ago, he [Michael Kitces] developed a terrific chart where he plotted market valuations against the safe withdrawal rate year by year. It was an amazingly close negative correlation between the two. The higher that stock valuations are, the lower the safe withdrawal rate turned out to be.

His conclusion was that when you get a CAPE (cyclically adjusted price-earnings ratio) above 20, you should stick with the lowest, the safe, withdrawal rate because otherwise it’s too risky. We’re certainly well above that now. So, I don’t think any kind of a scheme where you attempt to try to take out 5% or 5.5% now is likely to work.

I expect, at some point, that there’s going to be another serious decline back to more normal valuations. You’re going to have to start scaling back what you withdraw each year. It might be painful, after you have misled yourself about the kind of lifestyle you really think you can afford.

« Last Edit: January 11, 2018, 08:36:50 AM by AdrianC »

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1298 on: January 11, 2018, 08:39:01 AM »
"Insights on Using the 4% Withdrawal Rule From Its Creator" [William Bengen]

http://www.aaii.com/journal/article/insights-on-using-the-withdrawal-rule-from-its-creator

CR: Originally, in your 1994 study, ďDetermining Withdrawal Rates Using Historical Data,Ē (Journal of Financial Planning, October 1994), you used a 4% withdrawal rate. What prompted you to increase the withdrawal rate to 4.5%?

WB: I included more asset classes.

Originally, I only worked with two asset classes. I used U.S. large-company stocks and U.S. intermediate-term government bonds. I then added small-cap stocks. The small-cap stocks added enough of a boost in terms of return to allow the withdrawal rate to be increased.

It was originally around 4.2%, actually. Including small-cap stocks raised it a little bit to about 4.5%. This shows you the importance of having a diversified portfolio during retirement.


I thought this comment was also interesting:

WB: A couple of years ago, he [Michael Kitces] developed a terrific chart where he plotted market valuations against the safe withdrawal rate year by year. It was an amazingly close negative correlation between the two. The higher that stock valuations are, the lower the safe withdrawal rate turned out to be.

His conclusion was that when you get a CAPE (cyclically adjusted price-earnings ratio) above 20, you should stick with the lowest, the safe, withdrawal rate because otherwise itís too risky. Weíre certainly well above that now. So, I donít think any kind of a scheme where you attempt to try to take out 5% or 5.5% now is likely to work.

I expect, at some point, that thereís going to be another serious decline back to more normal valuations. Youíre going to have to start scaling back what you withdraw each year. It might be painful, after you have misled yourself about the kind of lifestyle you really think you can afford.


yep i plan to use the CAPE as an indicator. i'd likely work PT for one more year if i were at a 4% swr today. 

Classical_Liberal

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Re: Stop worrying about the 4% rule
« Reply #1299 on: January 11, 2018, 08:33:55 PM »
yep i plan to use the CAPE as an indicator. i'd likely work PT for one more year if i were at a 4% swr today.

So... This article comments 4.2% is a historical safemax; then states WR can be increased by diversifying asset classes.  It also states 5-5.5% probably wont work in a high CAPE environment.  This information leads you to believe OMY is needed at a 4% WR?   

Would you care to share your logic regarding 4% not being enough based on this information?