Author Topic: Stop worrying about the 4% rule  (Read 1023741 times)

Must_ache

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Re: Stop worrying about the 4% rule
« Reply #1950 on: April 13, 2021, 08:46:39 PM »
Here's a useful chart:

https://i2.wp.com/www.philosophicaleconomics.com/wp-content/uploads/2013/12/linearavg1.jpg

Historically, the higher the percentage of all US assets that are equities, the lower the ensuing 10-yr return. 

https://fred.stlouisfed.org/graph/?g=qis

We are sitting on a ratio of 0.476 which was only higher in the last 60 years during the 1998-2000 bubble.  The formula (which has an R^2 of 0.91) tells us to expect a 1% return over the next decade.  You can quote the historical performance of the market as some high single-digit number, and the graph would agree, but it would tell also to tell you to cancel that expectation for the next ten years.

https://www.philosophicaleconomics.com/2013/12/the-single-greatest-predictor-of-future-stock-market-returns/

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1951 on: May 19, 2021, 06:44:57 PM »
Here's a useful chart:

https://i2.wp.com/www.philosophicaleconomics.com/wp-content/uploads/2013/12/linearavg1.jpg

Historically, the higher the percentage of all US assets that are equities, the lower the ensuing 10-yr return. 

https://fred.stlouisfed.org/graph/?g=qis

We are sitting on a ratio of 0.476 which was only higher in the last 60 years during the 1998-2000 bubble.  The formula (which has an R^2 of 0.91) tells us to expect a 1% return over the next decade.  You can quote the historical performance of the market as some high single-digit number, and the graph would agree, but it would tell also to tell you to cancel that expectation for the next ten years.

https://www.philosophicaleconomics.com/2013/12/the-single-greatest-predictor-of-future-stock-market-returns/

That's based on a single asset class of large growth. The ensuing decade that followed the dotcom collapse saw small cap value return over 13% annualized.

vand

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Re: Stop worrying about the 4% rule
« Reply #1952 on: August 24, 2021, 07:35:34 AM »
A good rule of thumb for valuations vs SWR:

"In a 2008 paper, Kitces examined the relationship between the Shiller CAPE ratio and initial withdrawal rates. In statistical terms, he concluded that the correlation between the two was -0.74. So as the Shiller CAPE goes up, the safe initial withdrawal rate goes down."

https://www.forbes.com/advisor/investing/is-4-four-percent-rule-still-valid/?fbclid=IwAR2C25UG_gU9Ts3qPN9fqFHSpHVhR1yglnHTyHSOgDkOBOavhXtXjfwu1UM

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1953 on: August 24, 2021, 08:49:00 AM »
A good rule of thumb for valuations vs SWR:

"In a 2008 paper, Kitces examined the relationship between the Shiller CAPE ratio and initial withdrawal rates. In statistical terms, he concluded that the correlation between the two was -0.74. So as the Shiller CAPE goes up, the safe initial withdrawal rate goes down."

https://www.forbes.com/advisor/investing/is-4-four-percent-rule-still-valid/?fbclid=IwAR2C25UG_gU9Ts3qPN9fqFHSpHVhR1yglnHTyHSOgDkOBOavhXtXjfwu1UM

great article "good" rule of thumb but historically it never gets worse than 3.5% so there is a bottom end to that and the CAPE ratio has changed as GAAP has changed in the last few decades.

ender

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Re: Stop worrying about the 4% rule
« Reply #1954 on: September 07, 2021, 07:35:12 AM »
Past results are no guarantee of future success, but since this thread was posted the SP500 has more than doubled.

Someone who retired in mid-2015 could suffer almost a 50% permanent portfolio loss and be no worse off than they started, though of course they'd feel it differently.


boarder42

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Re: Stop worrying about the 4% rule
« Reply #1955 on: September 07, 2021, 07:42:26 AM »
Past results are no guarantee of future success, but since this thread was posted the SP500 has more than doubled.

Someone who retired in mid-2015 could suffer almost a 50% permanent portfolio loss and be no worse off than they started, though of course they'd feel it differently.

i was just discussing this the other day with a friend. That's likely the best case scenario for most people.  You will have 50% drops  if it can double before you get it you should feel fine.  I think of it kinda like the question everyone on the path to FI asks.  "When does my savings start to snow ball"

Now the question for FI people is when does it feel like you're not nervous about the 4% rule and to me thats once your money has doubled.  b/c worst case you're back where you started like you said and going into this with eyes wide open we all know we'll lose half our money at some point.

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1956 on: September 07, 2021, 07:47:35 AM »
Now the question for FI people is when does it feel like you're not nervous about the 4% rule...

When my 4%WR drops to a %WR that's never failed historically I'd feel pretty confident and that's a whole lot sooner than 2%WR. At 2%WR you are silly safe...at least from normal financial risks. If civilization falls, zombies, killer asteroids...well those are not problems money can solve.

ender

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Re: Stop worrying about the 4% rule
« Reply #1957 on: September 07, 2021, 07:53:21 AM »
Now the question for FI people is when does it feel like you're not nervous about the 4% rule...

When my 4%WR drops to a %WR that's never failed historically I'd feel pretty confident and that's a whole lot sooner than 2%WR. At 2%WR you are silly safe...at least from normal financial risks. If civilization falls, zombies, killer asteroids...well those are not problems money can solve.

Luckily just looking at the various fire calculators makes it pretty clear that historically portfolio failure modes (or risky ones) are obvious pretty quickly.

pecunia

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Re: Stop worrying about the 4% rule
« Reply #1958 on: September 07, 2021, 10:38:19 AM »
Now the question for FI people is when does it feel like you're not nervous about the 4% rule...

When my 4%WR drops to a %WR that's never failed historically I'd feel pretty confident and that's a whole lot sooner than 2%WR. At 2%WR you are silly safe...at least from normal financial risks. If civilization falls, zombies, killer asteroids...well those are not problems money can solve.

Luckily just looking at the various fire calculators makes it pretty clear that historically portfolio failure modes (or risky ones) are obvious pretty quickly.

Yeh - Well - The money looks good on paper.  Here's the thing I think about.  I can't say I really worry about it.  I see these big hurricanes, fires all over the world, the ice melting thing, talk about rerouting the Gulf Stream, bugs moving further North than ever to eat trees they could never munch on, the loss of the reefs in the ocean, ocean acidification, plastic everywhere, pandemic stuff and a few other things.  Then I think of when big changes like this happened before.  I figure about 65 million years ago when the rock fell into Mexico.  You got yer big trends like extinction and you got your little trends like following the stock market.  The stock market is the small stuff.  Don't sweat the small stuff.  Three percent is fine.

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Re: Stop worrying about the 4% rule
« Reply #1959 on: September 07, 2021, 02:10:10 PM »
I am OK to reset my SWR? 

2 years retired now, and I have spent about 2.5% WR annually of the original starting stache number and lacked for nothing.   

My stache is now 89% larger than that original starting number (yes, crazy, almost doubled in 2 years). 

Should I re-set my "FIRE SWR" to a higher number?  Essentially this will be a psychological exercise because I spend what I spend regardless, and I am less than 2% WR of the current stache.  It feels like I could just formally admit that I can double my annual spend without risk and call that my new SWR.  I have listened to and read Kitces and he talks about escape velocity and ratcheting spend, but this is very soon after I retired so I am questioning it. 

I know the 4% rule is measured against that original FIRE number then increased for inflation annually and not re-calculated as 4% of whatever my stache is the next year.  Since my balance has gone up-up-up it feels like I could simply pretend I just retired yesterday and will look at my stache now and figure 3% is now my new, forever number without fear.  It will help me loosen my mental purse strings and maybe do some bigger things easily.   

Is this dumb thinking? 

ender

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Re: Stop worrying about the 4% rule
« Reply #1960 on: September 07, 2021, 02:15:41 PM »
I think it depends if you ever plan on reducing it.

If you constantly increase it, and never decrease it, you basically guarantee at some point you're going to hit a "failure" in the 30 year timeline since almost all of them are a sequence of returns risk in your early years.

The reason most retirements do not trigger this is because of your situation.

That being said, increasing to 3% is still irrelevant as you aren't increasing it to 4% ;-)

MissNancyPryor

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Re: Stop worrying about the 4% rule
« Reply #1961 on: September 07, 2021, 02:35:12 PM »
I think it depends if you ever plan on reducing it.

If you constantly increase it, and never decrease it, you basically guarantee at some point you're going to hit a "failure" in the 30 year timeline since almost all of them are a sequence of returns risk in your early years.

The reason most retirements do not trigger this is because of your situation.

That being said, increasing to 3% is still irrelevant as you aren't increasing it to 4% ;-)

Right, since 3% is ample.  Would an annual reset at 3% be dangerous, whether the stache has gone up or down? 

Sometimes I feel like I should set up an automatic monthly withdrawal system, moving 1/12 of my 3% number into my checking account and when I don't spend all of that, the excess becomes money to re-invest or have fun with knowing I never have to doubt it.  But I am just not an auto-pilot person though, and like avoiding the tax man by carefully choosing how to fill my rain barrel just once each December.

I think I just wrote a Mustachian People Problem entry here ;) 

ender

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Re: Stop worrying about the 4% rule
« Reply #1962 on: September 07, 2021, 02:47:33 PM »
If you reset to 3% you will always have money left.

Even in extremes. If the start is $1m, even if the market drops 90% you'd just withdraw 3k.

This might be too low though :-)

MissNancyPryor

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Re: Stop worrying about the 4% rule
« Reply #1963 on: September 07, 2021, 03:21:24 PM »
@ender thanks!

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1964 on: September 07, 2021, 05:15:02 PM »
If you are not consumed by FUD & Perma-Bearishness this podcast is a good listen. It talks about adjusting WRs for the vast majority of cases where your money grows much faster than you spend it at your initial say 4%WR.

https://www.choosefi.com/flexible-spending-rules-for-early-retirees/


boarder42

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Re: Stop worrying about the 4% rule
« Reply #1965 on: September 07, 2021, 05:43:56 PM »
If you reset to 3% you will always have money left.

Even in extremes. If the start is $1m, even if the market drops 90% you'd just withdraw 3k.

This might be too low though :-)

In theory you could always adjust to 3% of your highest balance as it's never failed. So your investments double you can effectively most to a 6% swr and never run out of cash based on the original retirement number.

pecunia

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Re: Stop worrying about the 4% rule
« Reply #1966 on: September 07, 2021, 08:52:22 PM »
I'll bet Mr. Money Mustache has less than a 4 percent withdrawal rate.  Simple living makes it a non problem.  There will be money for special things when they come up.

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1967 on: September 08, 2021, 05:16:20 AM »
I'll bet Mr. Money Mustache has less than a 4 percent withdrawal rate.  Simple living makes it a non problem.  There will be money for special things when they come up.

MMM has a negative withdrawal rate as he's still in the accumulation phase of his life since his blog generates half a million dollars.  In general most people here won't just keep inflating lifestyle.  Its likely lots of money will be invested in worthwhile charities since the 4% SWR is very conservative.

Malcat

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Re: Stop worrying about the 4% rule
« Reply #1968 on: September 08, 2021, 05:37:37 AM »
I'll bet Mr. Money Mustache has less than a 4 percent withdrawal rate.  Simple living makes it a non problem.  There will be money for special things when they come up.

MMM has a negative withdrawal rate as he's still in the accumulation phase of his life since his blog generates half a million dollars.  In general most people here won't just keep inflating lifestyle.  Its likely lots of money will be invested in worthwhile charities since the 4% SWR is very conservative.

Even without the blog, he had a negative WR with his construction/real estate ventures.

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1969 on: September 08, 2021, 05:43:04 AM »
I'll bet Mr. Money Mustache has less than a 4 percent withdrawal rate.  Simple living makes it a non problem.  There will be money for special things when they come up.

MMM has a negative withdrawal rate as he's still in the accumulation phase of his life since his blog generates half a million dollars.  In general most people here won't just keep inflating lifestyle.  Its likely lots of money will be invested in worthwhile charities since the 4% SWR is very conservative.

Even without the blog, he had a negative WR with his construction/real estate ventures.

yes he is very creative at hiding his spending on things he enjoys like his property in downtown that is a business space full of expensive toys.  Nothing wrong with it or any of it.  It's how I run things i enjoy as efficiently as possible.

SwordGuy

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Re: Stop worrying about the 4% rule
« Reply #1970 on: September 08, 2021, 06:49:35 AM »
yes he is very creative at hiding his spending on things he enjoys like his property in downtown that is a business space full of expensive toys. 

Well, that's one way to look at it.   

If you asked me how much I spend a year to live on, I wouldn't include the $6,000 in rental property taxes or the $6,000 in rental property insurance or the $4,500 in property management fees or however much rental repairs or maintenance cost that year. 

I'm not "hiding" it.   It's not relevant to the question being asked, which is how much do you spend on your household to live on.

Same with MMM.

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1971 on: September 08, 2021, 06:54:43 AM »
yes he is very creative at hiding his spending on things he enjoys like his property in downtown that is a business space full of expensive toys. 

Well, that's one way to look at it.   

If you asked me how much I spend a year to live on, I wouldn't include the $6,000 in rental property taxes or the $6,000 in rental property insurance or the $4,500 in property management fees or however much rental repairs or maintenance cost that year. 

I'm not "hiding" it.   It's not relevant to the question being asked, which is how much do you spend on your household to live on.

Same with MMM.

more talking about the MMM HQ than a rental property.

ender

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Re: Stop worrying about the 4% rule
« Reply #1972 on: September 08, 2021, 06:58:47 AM »
Not to mention business expenses for tons of travel.

If you had a vacation you took and categorized it as "business" because you looked at some properties, would you still feel similarly about not including that spending as your personal spending @SwordGuy?

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1973 on: September 08, 2021, 07:49:39 AM »
I have expensed a lot of things to my business [vehicle, phone, internet, computers, home office, travel, eating out, etc...] it's a great tax write off, but if I didn't have a business I'd still have some/most of those costs. So if my pers/bus costs look like $30K/yr + $15K/yr if I didn't have the business my costs would not be $30K/yr....they probably be closer to $40K/yr.

If I had a pers finance blog and told my readers my annual spend was $30K/yr when I had the benefits of a $40K/yr lifestyle due to my business that's somewhat disingenuous and at a low-ish base spend the extra spend/benefit is significant.

It's also a bit disingenuous to say not bother with various types of insurance at a low annual spend to keep the numbers low without pointing out clearly that this approach is backstopped by many millions of $$ in investments and a negative WR.

If you read deeply into the MMM blog and this site you can figure all this out, but a casual visitor can leave the site with a skewed impression of what is going on.

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Re: Stop worrying about the 4% rule
« Reply #1974 on: September 08, 2021, 08:11:17 AM »
I FIREd 2 years ago but then got a $10k country club membership but then got a part time job to cover the cost.....so it doesn't count in my expenses....and I am still FIREd!

MMM spending has been a long standing debate, and I think most would conclude that his effective personal spending is far higher than advertised.   But most would probably agree that is OK (if he was honest about it) and see that he designed a life that works for him and found a way that he enjoys to make some extra money to cover those things.   

It's the disingenuous or delusional narrative he presents is what most don't like. 

SwordGuy

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Re: Stop worrying about the 4% rule
« Reply #1975 on: September 08, 2021, 09:42:38 AM »
Not to mention business expenses for tons of travel.

If you had a vacation you took and categorized it as "business" because you looked at some properties, would you still feel similarly about not including that spending as your personal spending @SwordGuy?

If it was a legitimate business expense (as opposed to a IRS qualified business expense), I wouldn't include the expenses related to just that portion of the trip.    Any extra expenses that were purely vacation oriented would be counted under personal spending for FIRE calculations.

Piggy-backing a vacation on a business trip is just being smart with your money.

MMM did lots of travel to spread the word about FIRE, which he did a great job of.   His blog funded that.   I consider the basic costs of making those trips business expenses.   If he brought the family along, those would be personal expenses.   If he stayed over an extra week for fun, that would be personal expenses.

If he quit his blog business those business expenses and the need for them would vanish.   They aren't an essential part of his post-retirement expenses to live on.

Complaining that he doesn't use some types of insurance because he's backstopped by a stash is the same way.  We don't use life insurance anymore.   Why?  Because at our ages it costs a lot of money and it doesn't really add much value for that cost.   We no longer need life insurance to survive on if one of us died.    I'm not "cheating" on my FIRE expenses because I don't buy it.   

Same thing with not paying a mortgage because I paid off the mortgage early.  I've seen people get their knickers in a wad over that issue, too.    It's no longer an expense so I don't count it for tracking the answer to the all-important question, "How much income do I need to remain retired?"   

Seems very clear to me.   

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1976 on: September 08, 2021, 09:47:59 AM »
Not to mention business expenses for tons of travel.

If you had a vacation you took and categorized it as "business" because you looked at some properties, would you still feel similarly about not including that spending as your personal spending @SwordGuy?

If it was a legitimate business expense (as opposed to a IRS qualified business expense), I wouldn't include the expenses related to just that portion of the trip.    Any extra expenses that were purely vacation oriented would be counted under personal spending for FIRE calculations.

Piggy-backing a vacation on a business trip is just being smart with your money.

MMM did lots of travel to spread the word about FIRE, which he did a great job of.   His blog funded that.   I consider the basic costs of making those trips business expenses.   If he brought the family along, those would be personal expenses.   If he stayed over an extra week for fun, that would be personal expenses.

If he quit his blog business those business expenses and the need for them would vanish.   They aren't an essential part of his post-retirement expenses to live on.

Complaining that he doesn't use some types of insurance because he's backstopped by a stash is the same way.  We don't use life insurance anymore.   Why?  Because at our ages it costs a lot of money and it doesn't really add much value for that cost.   We no longer need life insurance to survive on if one of us died.    I'm not "cheating" on my FIRE expenses because I don't buy it.   

Same thing with not paying a mortgage because I paid off the mortgage early.  I've seen people get their knickers in a wad over that issue, too.    It's no longer an expense so I don't count it for tracking the answer to the all-important question, "How much income do I need to remain retired?"   

Seems very clear to me.   

all of those things are barriers to the avg person when they see him proclaim his expenses and they also become excuses for the avg person not to join in the great journey we're on.  I think ChooseFI has probably done the best to bring this mainstream recently and declassify the RE stigma from the mantra.  They have different motives than MMM though - as he wants people to consume less overall.  Where chooseFI promotes just financial literacy and consuming less can and is one of the easier paths to FI in accumulation.

but we're super off topic now - the 4% rule is crazy safe

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Re: Stop worrying about the 4% rule
« Reply #1977 on: September 08, 2021, 10:49:46 AM »
To be honest, the spending side of the 4% Rule is probably the hardest part to really nail down, so I find the debate about MMM's spending to be interesting.  When the owner of a blog details their spending and it doesn't line up with reality (especially the reveal that he has Keith the Tax Guy do his taxes because they are so complicated), then you have to wonder if you are missing something.  Maybe ER and keeping spending at a low level just isn't that great after all.  It's even more relevant now that the FIRE crowd is collectively oohing and aahing that inflation is creeping in to their grocery bills (Retire by 40, Root of Good, etc.) and that maybe they should have bought a house sooner (Millenial Revolution, GRS, GoCurryCracker)... 

The math and investment / funding side is fairly straightforward, but really knowing what my desired spending will be in 10 years, when my job no longer pays for business class flights, health insurance, gives me raises to compensate for inflation, etc.  Well that is still interesting for me to hear people talk about. 

Malcat

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Re: Stop worrying about the 4% rule
« Reply #1978 on: September 08, 2021, 10:51:54 AM »
Not to mention business expenses for tons of travel.

If you had a vacation you took and categorized it as "business" because you looked at some properties, would you still feel similarly about not including that spending as your personal spending @SwordGuy?

If it was a legitimate business expense (as opposed to a IRS qualified business expense), I wouldn't include the expenses related to just that portion of the trip.    Any extra expenses that were purely vacation oriented would be counted under personal spending for FIRE calculations.

Piggy-backing a vacation on a business trip is just being smart with your money.

MMM did lots of travel to spread the word about FIRE, which he did a great job of.   His blog funded that.   I consider the basic costs of making those trips business expenses.   If he brought the family along, those would be personal expenses.   If he stayed over an extra week for fun, that would be personal expenses.

If he quit his blog business those business expenses and the need for them would vanish.   They aren't an essential part of his post-retirement expenses to live on.

Complaining that he doesn't use some types of insurance because he's backstopped by a stash is the same way.  We don't use life insurance anymore.   Why?  Because at our ages it costs a lot of money and it doesn't really add much value for that cost.   We no longer need life insurance to survive on if one of us died.    I'm not "cheating" on my FIRE expenses because I don't buy it.   

Same thing with not paying a mortgage because I paid off the mortgage early.  I've seen people get their knickers in a wad over that issue, too.    It's no longer an expense so I don't count it for tracking the answer to the all-important question, "How much income do I need to remain retired?"   

Seems very clear to me.   

all of those things are barriers to the avg person when they see him proclaim his expenses and they also become excuses for the avg person not to join in the great journey we're on.  I think ChooseFI has probably done the best to bring this mainstream recently and declassify the RE stigma from the mantra.  They have different motives than MMM though - as he wants people to consume less overall.  Where chooseFI promotes just financial literacy and consuming less can and is one of the easier paths to FI in accumulation.

but we're super off topic now - the 4% rule is crazy safe

I get that point, but I also see it as one of the awesome benefits of being financially independent and focusing on just building the life you want.

I agree that continuing to call it a 25K spend is a bit silly, but on the flip side, it's also kind of awesome that this guy retired because he could afford to and then by focusing on just doing what he enjoys, managed to find a way to get other people to pay for all of his luxuries.

I know for me, part of the perks for my work was endless high end dinners, often at private clubs, and galas, and high end conferences, and free luxury sports tickets. But now that I can't do that work, I would never pay for those things out of my own pocket.

Was it disingenuous for me to not claim those dinners and events in my spending? Few of them were absolute requirements of my job.

Should someone who gets free theater tickets because they volunteer there include the cost of tickets in their spending?

What about cc churning?

There's no clear line as to where a perk or business expense should or shouldn't be counted towards someone's spend. Instead, the main focus of Pete's retirement budget should be "holy fuck, this dude found a way to live this remarkable lifestyle where he has more luxury and it costs him negative money!"

I personally have never cared much for Pete's pre FIRE journey, it doesn't interest me. The part that caught my attention was his post-FIRE life. To me, that's where the really appealing story is.

Not "Dude saved a bunch of money in his 20s and never again had to work". I mean, cool story, but not my jam.

But "Dude at 30 pursues a life of following his passions, quits his day job, and stumbles face fucking first into a fantasy dream life where he can do whatever he wants and live like a fucking king"
Now that's a story that turns my head.

Malcat

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Re: Stop worrying about the 4% rule
« Reply #1979 on: September 08, 2021, 10:53:11 AM »
To be honest, the spending side of the 4% Rule is probably the hardest part to really nail down, so I find the debate about MMM's spending to be interesting.  When the owner of a blog details their spending and it doesn't line up with reality (especially the reveal that he has Keith the Tax Guy do his taxes because they are so complicated), then you have to wonder if you are missing something.  Maybe ER and keeping spending at a low level just isn't that great after all.  It's even more relevant now that the FIRE crowd is collectively oohing and aahing that inflation is creeping in to their grocery bills (Retire by 40, Root of Good, etc.) and that maybe they should have bought a house sooner (Millenial Revolution, GRS, GoCurryCracker)... 

The math and investment / funding side is fairly straightforward, but really knowing what my desired spending will be in 10 years, when my job no longer pays for business class flights, health insurance, gives me raises to compensate for inflation, etc.  Well that is still interesting for me to hear people talk about.

The spending side is the biggest challenge and it's the number that most people just pull out of their ass, which is why I call FIRE simulators "real math with made up numbers".

It's also why fussing about the 4% rule is nonsense.

ender

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Re: Stop worrying about the 4% rule
« Reply #1980 on: September 08, 2021, 10:57:46 AM »
Personally I think it's rather amusing that this thread, which was started to help people realize the 4% rule is safe, has had a discussion with numerous people who are FIRE'd or planning on FIREing talking about what is effectively the "shit I accidentally am making income in retirement, is it really a 4% rule retirement anymore?" problem.


boarder42

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Re: Stop worrying about the 4% rule
« Reply #1981 on: September 08, 2021, 10:58:11 AM »
Not to mention business expenses for tons of travel.

If you had a vacation you took and categorized it as "business" because you looked at some properties, would you still feel similarly about not including that spending as your personal spending @SwordGuy?

If it was a legitimate business expense (as opposed to a IRS qualified business expense), I wouldn't include the expenses related to just that portion of the trip.    Any extra expenses that were purely vacation oriented would be counted under personal spending for FIRE calculations.

Piggy-backing a vacation on a business trip is just being smart with your money.

MMM did lots of travel to spread the word about FIRE, which he did a great job of.   His blog funded that.   I consider the basic costs of making those trips business expenses.   If he brought the family along, those would be personal expenses.   If he stayed over an extra week for fun, that would be personal expenses.

If he quit his blog business those business expenses and the need for them would vanish.   They aren't an essential part of his post-retirement expenses to live on.

Complaining that he doesn't use some types of insurance because he's backstopped by a stash is the same way.  We don't use life insurance anymore.   Why?  Because at our ages it costs a lot of money and it doesn't really add much value for that cost.   We no longer need life insurance to survive on if one of us died.    I'm not "cheating" on my FIRE expenses because I don't buy it.   

Same thing with not paying a mortgage because I paid off the mortgage early.  I've seen people get their knickers in a wad over that issue, too.    It's no longer an expense so I don't count it for tracking the answer to the all-important question, "How much income do I need to remain retired?"   

Seems very clear to me.   

all of those things are barriers to the avg person when they see him proclaim his expenses and they also become excuses for the avg person not to join in the great journey we're on.  I think ChooseFI has probably done the best to bring this mainstream recently and declassify the RE stigma from the mantra.  They have different motives than MMM though - as he wants people to consume less overall.  Where chooseFI promotes just financial literacy and consuming less can and is one of the easier paths to FI in accumulation.

but we're super off topic now - the 4% rule is crazy safe

I get that point, but I also see it as one of the awesome benefits of being financially independent and focusing on just building the life you want.

I agree that continuing to call it a 25K spend is a bit silly, but on the flip side, it's also kind of awesome that this guy retired because he could afford to and then by focusing on just doing what he enjoys, managed to find a way to get other people to pay for all of his luxuries.

I know for me, part of the perks for my work was endless high end dinners, often at private clubs, and galas, and high end conferences, and free luxury sports tickets. But now that I can't do that work, I would never pay for those things out of my own pocket.


Was it disingenuous for me to not claim those dinners and events in my spending? Few of them were absolute requirements of my job.

Should someone who gets free theater tickets because they volunteer there include the cost of tickets in their spending?

What about cc churning?

There's no clear line as to where a perk or business expense should or shouldn't be counted towards someone's spend. Instead, the main focus of Pete's retirement budget should be "holy fuck, this dude found a way to live this remarkable lifestyle where he has more luxury and it costs him negative money!"

I personally have never cared much for Pete's pre FIRE journey, it doesn't interest me. The part that caught my attention was his post-FIRE life. To me, that's where the really appealing story is.

Not "Dude saved a bunch of money in his 20s and never again had to work". I mean, cool story, but not my jam.

But "Dude at 30 pursues a life of following his passions, quits his day job, and stumbles face fucking first into a fantasy dream life where he can do whatever he wants and live like a fucking king"
Now that's a story that turns my head.

The luxury of these wore off for me about 2 years ago - its cool for awhile but its all the same eventually and we're just pouring money down the drain.  My client doesn't care if i take him to a michellin 3 star place or the bar down the street he just want to hang out and shoot the shit.

If your clients are only showing up to the big spendy things you haven't cultivated the right relationships. 

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #1982 on: September 08, 2021, 11:03:45 AM »
Was it disingenuous for me to not claim those dinners and events in my spending?

If you aren't running a MMM-esque FIRE empire it's irrelevant how you classify your spending. If you are trying to convince other people to change their lives and using your own life as an example, and making a fair buck in the process, than I'd say it was disingenuous not to be accurate/clear with your spending.

EscapeVelocity2020

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Re: Stop worrying about the 4% rule
« Reply #1983 on: September 08, 2021, 11:04:08 AM »
Personally I think it's rather amusing that this thread, which was started to help people realize the 4% rule is safe, has had a discussion with numerous people who are FIRE'd or planning on FIREing talking about what is effectively the "shit I accidentally am making income in retirement, is it really a 4% rule retirement anymore?" problem.

Amusing, unless you aren't making income in retirement and run in to one of these 'spending isn't what I thought it was going to be' problems- https://thefinancebuff.com/relocating-buy-or-rent-new-rules.html

Quote
By now itís obvious I botched our relocation last year. The decision to relocate was correct but I executed it poorly due to my lack of experience. I also didnít think through all the options when I only relied on some ďrulesĒ that were either outdated or didnít apply to our situation. In the end, my poor execution cost us $300,000.

We have loads of FIRE'es that are 'in between homes' / nomadic who are caught in this very situation...

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1984 on: September 08, 2021, 11:16:44 AM »
Was it disingenuous for me to not claim those dinners and events in my spending?

If you aren't running a MMM-esque FIRE empire it's irrelevant how you classify your spending. If you are trying to convince other people to change their lives and using your own life as an example, and making a fair buck in the process, than I'd say it was disingenuous not to be accurate/clear with your spending.

and its not hard for him to do this the "right" way

What my spending would be if i'd just quit and never made a single dollar - here you go.

Here are the cool things i've done that helped me do this other cool shit i do and what it costs me. 




tooqk4u22

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Re: Stop worrying about the 4% rule
« Reply #1985 on: September 08, 2021, 12:00:35 PM »
Was it disingenuous for me to not claim those dinners and events in my spending?

If you aren't running a MMM-esque FIRE empire it's irrelevant how you classify your spending. If you are trying to convince other people to change their lives and using your own life as an example, and making a fair buck in the process, than I'd say it was disingenuous not to be accurate/clear with your spending.

and its not hard for him to do this the "right" way

What my spending would be if i'd just quit and never made a single dollar - here you go.

Here are the cool things i've done that helped me do this other cool shit i do and what it costs me.

This



But in reality he started a blog for fun and it got to a point where it was making in two years what he (and spouse) retired on to begin with.   Some of which he spends, some of which is donated, some is invested in other stuff (commercial buildings, homes). It all comes back to the blog (and forum), without that he wouldn't have the other stuff.   The funny thing is the blog was only good for the first 5ish years, after that it was all garbage

Malcat

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Re: Stop worrying about the 4% rule
« Reply #1986 on: September 08, 2021, 01:38:01 PM »
]

The luxury of these wore off for me about 2 years ago - its cool for awhile but its all the same eventually and we're just pouring money down the drain.  My client doesn't care if i take him to a michellin 3 star place or the bar down the street he just want to hang out and shoot the shit.

If your clients are only showing up to the big spendy things you haven't cultivated the right relationships.

I was the client, and a lot of the people wining and dining me are good personal friends. So basically, my social life was being subsidized.

ETA: whether *you* see value in it at all is completely beside my point. My point was, there are some luxuries that people are willing to engage in, but only if they are paid for by someone else. So should I count those dinners and sports tickets when accounting for the cost of my lifestyle, or should I not because I'm not willing to spend after tax dollars on them?

Likewise, should Pete's "business expenses" count? What if he were to give them up if he wasn't able to pay for them as business expenses?

Where's the line? I know there is a line, but I doubt everyone would agree as to where it is.

Personally, I don't care, as I said, I think the more interesting story is how he created the life he wanted and managed to not have to pay for his luxuries with any after tax dollars. The same way a lot of my colleagues do international lectures, which gets their flights and some travel costs covered for international trips. They travel to Amsterdam to attend a 3 day event, give a 3 hour lecture, get all of their expenses paid, but extend their stay by 5 days.
« Last Edit: September 08, 2021, 02:21:34 PM by Malcat »

ender

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Re: Stop worrying about the 4% rule
« Reply #1987 on: September 08, 2021, 02:29:36 PM »
Where's the line? I know there is a line, but I doubt everyone would agree as to where it is.

For me it's pretty simple.

If you regularly post your yearly spending as a lower number because you've manipulated some of your personal spending into a separate category, as a way to brag about your low spending, it's not ok.

If you don't brag about it and only use it as a metric you track? No one cares how you categorize it.


If I tell you "I gained 50 pounds eating lettuce products for my diet!" and then tell you I only maintained that diet for 20 hours a day, and binged on ice cream the other 4, you'd probably find it misleading too.

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1988 on: September 08, 2021, 02:47:24 PM »
]

The luxury of these wore off for me about 2 years ago - its cool for awhile but its all the same eventually and we're just pouring money down the drain.  My client doesn't care if i take him to a michellin 3 star place or the bar down the street he just want to hang out and shoot the shit.

If your clients are only showing up to the big spendy things you haven't cultivated the right relationships.

I was the client, and a lot of the people wining and dining me are good personal friends. So basically, my social life was being subsidized.

ETA: whether *you* see value in it at all is completely beside my point. My point was, there are some luxuries that people are willing to engage in, but only if they are paid for by someone else. So should I count those dinners and sports tickets when accounting for the cost of my lifestyle, or should I not because I'm not willing to spend after tax dollars on them?

Likewise, should Pete's "business expenses" count? What if he were to give them up if he wasn't able to pay for them as business expenses?

Where's the line? I know there is a line, but I doubt everyone would agree as to where it is.

Personally, I don't care, as I said, I think the more interesting story is how he created the life he wanted and managed to not have to pay for his luxuries with any after tax dollars. The same way a lot of my colleagues do international lectures, which gets their flights and some travel costs covered for international trips. They travel to Amsterdam to attend a 3 day event, give a 3 hour lecture, get all of their expenses paid, but extend their stay by 5 days.

i see my statement came a bit off as me talking to YOU but it was a global you.  And i agree what he's done is great afterwards and its what i will do with anything i can make fit in a bubble that i can write off.  but i'd agree with ender above about where the line is drawn - HES NOT LIVING THE LIFE HE CLAIMS annually.  which isnt a problem for me our you or any of us here b/c we're not global icons in the FIRE space.  its the annual budget that should be revised b/c most people think living on 20k is insane to begin with.

Malcat

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Re: Stop worrying about the 4% rule
« Reply #1989 on: September 08, 2021, 04:06:52 PM »
]

The luxury of these wore off for me about 2 years ago - its cool for awhile but its all the same eventually and we're just pouring money down the drain.  My client doesn't care if i take him to a michellin 3 star place or the bar down the street he just want to hang out and shoot the shit.

If your clients are only showing up to the big spendy things you haven't cultivated the right relationships.

I was the client, and a lot of the people wining and dining me are good personal friends. So basically, my social life was being subsidized.

ETA: whether *you* see value in it at all is completely beside my point. My point was, there are some luxuries that people are willing to engage in, but only if they are paid for by someone else. So should I count those dinners and sports tickets when accounting for the cost of my lifestyle, or should I not because I'm not willing to spend after tax dollars on them?

Likewise, should Pete's "business expenses" count? What if he were to give them up if he wasn't able to pay for them as business expenses?

Where's the line? I know there is a line, but I doubt everyone would agree as to where it is.

Personally, I don't care, as I said, I think the more interesting story is how he created the life he wanted and managed to not have to pay for his luxuries with any after tax dollars. The same way a lot of my colleagues do international lectures, which gets their flights and some travel costs covered for international trips. They travel to Amsterdam to attend a 3 day event, give a 3 hour lecture, get all of their expenses paid, but extend their stay by 5 days.

i see my statement came a bit off as me talking to YOU but it was a global you.  And i agree what he's done is great afterwards and its what i will do with anything i can make fit in a bubble that i can write off.  but i'd agree with ender above about where the line is drawn - HES NOT LIVING THE LIFE HE CLAIMS annually.  which isnt a problem for me our you or any of us here b/c we're not global icons in the FIRE space.  its the annual budget that should be revised b/c most people think living on 20k is insane to begin with.

Agreed, and I really think he missed out on an opportunity to explore a whole new lifestyle concept that could be very relevant and popular for FI community folks.

I think he's such a great example of amping up life after retiring young. There's a lot of fantastic posts that could be written about the level of lifestyle engineering he's managed to do. He talks a bit about it, but if it were me, I have so many ideas for engaging blog posts I would write about how *different* my life is post-FIRE, as opposed to trying to make it sound like it's still the same.

To me it's a lost opportunity. I would love to hear more about this stuff and not just from a factual "hey I did this kind of way", but really digging into the personal philosophy and impact of it.

To bring it back on topic though, this is where it gets tricky to predict retirement spending.

It's hard to know what your activities will be once you have all the free time in the world. And there are SO MANY ways to get luxuries for cheap or free if you have free time to volunteer.

So someone might project a spend level, but then radically drop their spending in certain categories because if they're not working, they have the capacity to be much more creative.

Like someone who spends a lot on golf might get free golf access for volunteering to fundraise, or teach kids lessons, etc.

It's hard to predict what expenses will come up, it's hard to predict what savings can be found, and it's hard to predict if money making opportunities might come along.

The future is just plain hard to predict. Which means that so are projected spend amounts.

pecunia

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Re: Stop worrying about the 4% rule
« Reply #1990 on: September 08, 2021, 04:22:08 PM »

- SNIP -


Agreed, and I really think he missed out on an opportunity to explore a whole new lifestyle concept that could be very relevant and popular for FI community folks.

- SNIP -


I kind of like that.  It's a bit of a different story.  He escaped the cubical life.  He escaped looking at the CRT of the computer for long dreary days.  (Assuming he left before flat screens)  He escaped schedules, deadlines and having his life dictated by others.  He was willing to live a marginal existence of $25,000.  But, this is America where free thinking and hard work are rewarded.  He became a vast success emulated by thousands of others who also found this freedom.

And he didn't even have to peddle his training program on real Estate on late night TV.

Read his posts and you too will understand the success you can have by living under the 4 percent rule. (or 3 percent to be really safe.)

Sometimes reality is better than the story.

TomTX

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Re: Stop worrying about the 4% rule
« Reply #1991 on: September 16, 2021, 05:42:59 PM »
If your clients are only showing up to the big spendy things you haven't cultivated the right relationships.

Back when I participated in such things, the vendor I most enjoyed the "free lunch" with would just take the whole group to have the $10-$15 lunch specials at a nearby restaurant.

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1992 on: September 16, 2021, 05:54:12 PM »
If your clients are only showing up to the big spendy things you haven't cultivated the right relationships.

Back when I participated in such things, the vendor I most enjoyed the "free lunch" with would just take the whole group to have the $10-$15 lunch specials at a nearby restaurant.

How much poverty in America could be solved if that's what everyone did. I've been at 50k 15 person dinners.  Like wtf are we doing.

Wolfpack Mustachian

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Re: Stop worrying about the 4% rule
« Reply #1993 on: September 16, 2021, 07:46:35 PM »
If your clients are only showing up to the big spendy things you haven't cultivated the right relationships.

Back when I participated in such things, the vendor I most enjoyed the "free lunch" with would just take the whole group to have the $10-$15 lunch specials at a nearby restaurant.

How much poverty in America could be solved if that's what everyone did. I've been at 50k 15 person dinners.  Like wtf are we doing.

Dang. I thought my $1200 or so dinner for like 8 people was pretty pricey, lol.

Mr. Green

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Re: Stop worrying about the 4% rule
« Reply #1994 on: September 18, 2021, 02:43:09 AM »
If your clients are only showing up to the big spendy things you haven't cultivated the right relationships.

Back when I participated in such things, the vendor I most enjoyed the "free lunch" with would just take the whole group to have the $10-$15 lunch specials at a nearby restaurant.

How much poverty in America could be solved if that's what everyone did. I've been at 50k 15 person dinners.  Like wtf are we doing.
How does a meal exceed 3k per person? Wine? Truffles?

boarder42

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Re: Stop worrying about the 4% rule
« Reply #1995 on: September 18, 2021, 03:25:17 AM »
If your clients are only showing up to the big spendy things you haven't cultivated the right relationships.

Back when I participated in such things, the vendor I most enjoyed the "free lunch" with would just take the whole group to have the $10-$15 lunch specials at a nearby restaurant.

How much poverty in America could be solved if that's what everyone did. I've been at 50k 15 person dinners.  Like wtf are we doing.
How does a meal exceed 3k per person? Wine? Truffles?

yep wine, booze, Michelin 3 star place, truffles check.  I was along for the ride.

2Birds1Stone

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Re: Stop worrying about the 4% rule
« Reply #1996 on: September 18, 2021, 04:07:07 AM »
If your clients are only showing up to the big spendy things you haven't cultivated the right relationships.

Back when I participated in such things, the vendor I most enjoyed the "free lunch" with would just take the whole group to have the $10-$15 lunch specials at a nearby restaurant.

How much poverty in America could be solved if that's what everyone did. I've been at 50k 15 person dinners.  Like wtf are we doing.
How does a meal exceed 3k per person? Wine? Truffles?

In my experience multiple bottles of Opus One.

Goanywhere

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Re: Stop worrying about the 4% rule
« Reply #1997 on: October 16, 2021, 12:12:27 PM »
Has this been discussed: https://www.financialsamurai.com/proper-safe-withdrawal-rate/

Personally I disregarded most of it - but I am interested in whether others share the same view that 4% is no longer relevant in the low bond yield environment ?


2Birds1Stone

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Re: Stop worrying about the 4% rule
« Reply #1998 on: October 16, 2021, 12:32:44 PM »
Won't even click the link because Sam can eat a big ol' bag of d!cks.

Goanywhere

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Re: Stop worrying about the 4% rule
« Reply #1999 on: October 16, 2021, 12:46:24 PM »
Won't even click the link because Sam can eat a big ol' bag of d!cks.

Hahaha