Author Topic: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?  (Read 33113 times)

nereo

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #300 on: February 27, 2017, 03:48:29 PM »
Why is it that people can be content working a salaried job that pays $xx,xxx/year with little room for advancement, year after year
Some of us have to pay back time off a commitment incurred from free training in our salaried jobs. I know that's my fault for committing, but take me back to age 20 and I think I'd make the same decision again. I'm a big fan of the FIRE concept, but I think one of its faults is that it assumes that all jobs are lame. A big part of the reason I don't have a higher savings rate is my job just isn't that bad and I don't feel a lot of pressure to get out of it.
not sure if you were intending to take my quote out of context, but I wasn't commenting about people being satisfied about working a salaried job so much as I was questioning why doing the same in ER seems such a mental block for some.
That said, it sounds like we are similar in many ways. It's taken me the better part of a decade in training to get where I am, and despite being active on this forum we're more SWARMIs than ER types.  Our plan is to continue working in our respective fields for the next couple of decades, but in a more limited fashion (i.e. part-time). 
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Car Jack

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #301 on: February 28, 2017, 01:36:25 PM »
There is more to this than pick 4% and nothing else matters and you're good forever.  Bogleheads wiki has a good condensed version of the Trinity Study which attempted to find a good number for a Sustainable Withdrawal Rate.

https://www.bogleheads.org/wiki/Safe_withdrawal_rates

Some things to note:  Your asset allocation changes things.
The 4% number is essentially a withdrawal rate that will sustain your income for 30 years with great probability.

Wait.....what did I just say?  So if you're 20, and have some disease that's going to kill you when you're 50, and you can keep enough stock funds, then you're good to go.  If not, that withdrawal rate has to be smaller.  Like 1%.  Whoops.  Read the link.  There are color glossy charts with circles and arrows and a paragraph on the back of each one to be used as evidence against me.

nereo

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #302 on: February 28, 2017, 01:59:25 PM »
Bogelheads is a great source for informatino, but they are often incredibly, almost maniacally conservative. 
1% WR is absurd unless you are convinced that the future will be a great deal worse than any period in the last 100+ years, which happens to include the great depression and two world wars.  Using a 4% WR the majority of portfolios have wound up with MORE money after 30 years.  With a 2.8% every scenario has seen the portfolio increase.

Going to 1% is a 'head for the hills and get your ammo" sort of scenario; by definition that's 100x your annual spending, which pretty much means if one simply keeps even with inflation his/her portfolio would last for 100 years.

As always, flexibility can be your greatest asset regardless of the WR you choose.
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Retire-Canada

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #303 on: February 28, 2017, 02:28:42 PM »
Going to 1% is a 'head for the hills and get your ammo" sort of scenario; by definition that's 100x your annual spending, which pretty much means if one simply keeps even with inflation his/her portfolio would last for 100 years.

It's actually pretty cunning. If you work long enough to save that much you might just die at your desk. Think how awesome that would be! Zero chance of running out of money under any circumstance! It doesn't get saferer than that folks. ;)

RangerOne

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #304 on: March 01, 2017, 12:34:32 PM »
At least part of the 4% rule at least historically stems from the fact that returns at or above 4% have historically been achievable with less volatile investments like bonds, maybe even savings accounts, or annuities for people who are willing to give up some control for a guarantee.

That fact that all those investments have been rough on returns recently or at least the past couple years with bonds coming to a crawl too as interest rates trickle up puts some retires in a somewhat long term pickle since having most of their money in say a bond index is not going to sustain a 4% withdrawal through earnings.

The rules for someone who is traditionally retiring with at best 30 years of life left in them and an ER are a bit different to begin with. A 20 or 30 something ER isn't going to use an annuity.

Also someone this young in tough times could take up side jobs and let their investments sit untouched for a year. MMM, when he talks about 4%, it seems he is looking at a more sustaining withdrawal in a more equity based account, where as most traditional retirement calculations expect you to eventually deplete your investments and maintain a steady withdrawal rate.

The philosophy of ER doesn't seem to preach never work a day in your life again and never run out of money. It is more like, you don't have to work. So save enough money that you can live off investments most of the time, but be flexible enough to pick up some side work to keep your nest egg stable or growing.

Metric Mouse

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #305 on: March 01, 2017, 01:03:45 PM »
Going to 1% is a 'head for the hills and get your ammo" sort of scenario; by definition that's 100x your annual spending, which pretty much means if one simply keeps even with inflation his/her portfolio would last for 100 years.

It's actually pretty cunning. If you work long enough to save that much you might just die at your desk. Think how awesome that would be! Zero chance of running out of money under any circumstance! It doesn't get saferer than that folks. ;)
Working until you die... 100% fool proof. Anything else is just too risky...
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MustacheMathTM

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #306 on: March 01, 2017, 01:07:27 PM »
Going to 1% is a 'head for the hills and get your ammo" sort of scenario; by definition that's 100x your annual spending, which pretty much means if one simply keeps even with inflation his/her portfolio would last for 100 years.

It's actually pretty cunning. If you work long enough to save that much you might just die at your desk. Think how awesome that would be! Zero chance of running out of money under any circumstance! It doesn't get saferer than that folks. ;)
Working until you die... 100% fool proof. Anything else is just too risky...
Still too risky!  What if you lose your job?  Better have two.

Metric Mouse

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #307 on: March 01, 2017, 01:16:07 PM »
Going to 1% is a 'head for the hills and get your ammo" sort of scenario; by definition that's 100x your annual spending, which pretty much means if one simply keeps even with inflation his/her portfolio would last for 100 years.

It's actually pretty cunning. If you work long enough to save that much you might just die at your desk. Think how awesome that would be! Zero chance of running out of money under any circumstance! It doesn't get saferer than that folks. ;)
Working until you die... 100% fool proof. Anything else is just too risky...
Still too risky!  What if you lose your job?  Better have two.
Good point. And what if one loses their job AND the market crashes? Happened in 2008. Best to keep cash in case this happens. Or maybe all gold?
Give me one fine day of plain sailing weather and I can mess up anything.

MustacheMathTM

Retire-Canada

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #308 on: March 01, 2017, 01:34:05 PM »
Still too risky!  What if you lose your job?  Better have two.

Fuck me! This is why I come to these forums! I thought I had every risk nailed and you showed me I had a Bigly League hole in my plan and I didn't even see it.

What do you think about 1 FT job and 2 PT jobs for greater redundancy?

Classical_Liberal

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #309 on: March 01, 2017, 01:50:35 PM »
Still too risky!  What if you lose your job?  Better have two.

Fuck me! This is why I come to these forums! I thought I had every risk nailed and you showed me I had a Bigly League hole in my plan and I didn't even see it.

What do you think about 1 FT job and 2 PT jobs for greater redundancy?

As long as you have "job diversification"; the PT jobs must be in completely different fields.

steveo

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #310 on: March 01, 2017, 05:48:16 PM »
Still too risky!  What if you lose your job?  Better have two.

Fuck me! This is why I come to these forums! I thought I had every risk nailed and you showed me I had a Bigly League hole in my plan and I didn't even see it.

What do you think about 1 FT job and 2 PT jobs for greater redundancy?

As long as you have "job diversification"; the PT jobs must be in completely different fields.

I like this idea. You also need a job though that isn't susceptible to the standard economic cycle.

boarder42

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #311 on: March 01, 2017, 05:54:11 PM »
Still too risky!  What if you lose your job?  Better have two.

Fuck me! This is why I come to these forums! I thought I had every risk nailed and you showed me I had a Bigly League hole in my plan and I didn't even see it.

What do you think about 1 FT job and 2 PT jobs for greater redundancy?

As long as you have "job diversification"; the PT jobs must be in completely different fields.

I like this idea. You also need a job though that isn't susceptible to the standard economic cycle.

So
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trollwithamustache

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #312 on: March 17, 2017, 11:21:05 AM »
Going to 1% is a 'head for the hills and get your ammo" sort of scenario; by definition that's 100x your annual spending, which pretty much means if one simply keeps even with inflation his/her portfolio would last for 100 years.

It's actually pretty cunning. If you work long enough to save that much you might just die at your desk. Think how awesome that would be! Zero chance of running out of money under any circumstance! It doesn't get saferer than that folks. ;)
Working until you die... 100% fool proof. Anything else is just too risky...
Still too risky!  What if you lose your job?  Better have two.
Good point. And what if one loses their job AND the market crashes? Happened in 2008. Best to keep cash in case this happens. Or maybe all gold?

Bitcoin. MMM is nothing if not modern!

Metric Mouse

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #313 on: March 20, 2017, 08:02:41 AM »
Going to 1% is a 'head for the hills and get your ammo" sort of scenario; by definition that's 100x your annual spending, which pretty much means if one simply keeps even with inflation his/her portfolio would last for 100 years.

It's actually pretty cunning. If you work long enough to save that much you might just die at your desk. Think how awesome that would be! Zero chance of running out of money under any circumstance! It doesn't get saferer than that folks. ;)
Working until you die... 100% fool proof. Anything else is just too risky...
Still too risky!  What if you lose your job?  Better have two.
Good point. And what if one loses their job AND the market crashes? Happened in 2008. Best to keep cash in case this happens. Or maybe all gold?

Bitcoin. MMM is nothing if not modern!
Nice. :D
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MustacheMathTM

BuffaloStache

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #314 on: April 07, 2017, 12:01:17 AM »
...

Bitcoin. MMM is nothing if not modern!

Too mainstream. Better off using DogeCoin or one of the other million knock-offs
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trollwithamustache

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #315 on: April 11, 2017, 12:23:37 PM »
...

Bitcoin. MMM is nothing if not modern!

Too mainstream. Better off using DogeCoin or one of the other million knock-offs

Bitcoin has treated me much better than the gold or ammo for the Trumpocalypse so far.  :)

BuffaloStache

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #316 on: April 13, 2017, 07:55:35 PM »
Bitcoin has treated me much better than the gold or ammo for the Trumpocalypse so far.  :)

Do you actually have some? I've contemplated getting some, but figured I'd wait until I have a higher net worth and feel like it's ok to put some $$ into something that might not pay off at all.
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trollwithamustache

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #317 on: April 17, 2017, 08:09:04 AM »
Bitcoin has treated me much better than the gold or ammo for the Trumpocalypse so far.  :)

Do you actually have some? I've contemplated getting some, but figured I'd wait until I have a higher net worth and feel like it's ok to put some $$ into something that might not pay off at all.

I do have a few coins I keep at coinbase.  I even ran a mining rig for a while as an experiment.  (broke even mining after selling the equipment) Bitcoin fascinates me as an exchange medium and an alternative to large banks. Its popularity and usage keeps growing as its a mainstream alternative thing to do.  That being said, holding Bitcoin can be criticized as a greater fool trade... there is no intrinsic value, its not backed by an army like a fiat currency and technologically, some of  the other crypto currencies like Eth may actually be better designed.

So yeah, trades like this require limited position sizing.  Once net worth is beyond a certain point, lots of alternative investments start to make sense for small positions. In Bitcoins case, my position is so small its more of an experiment than a position size.  It entertains me to follow it and if I make a few bucks, I'll roll it into the next project like this.

BuffaloStache

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #318 on: April 17, 2017, 03:39:19 PM »
It entertains me to follow it and if I make a few bucks, I'll roll it into the next project like this.

This seems like the best mindset to have. I'll probably be in a similar boat once I feel I've made some serious progress on my path to FI (in a couple years)
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BuffaloStache

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Re: The 4% Rule For Those In Their Mid-20's... Completely Unrealistic?
« Reply #319 on: April 19, 2017, 02:20:45 PM »
Somewhat bringing this discussion back on track, I'd like to throw out the following thread:

https://forum.mrmoneymustache.com/investor-alley/stop-worrying-about-the-4-rule/

Seems like there is a heated debate going on as to whether the 4% rule is *too* conservative, and definitely not unrealistic. Not saying I agree, just interesting to read.
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