Author Topic: For those who follow the 4% rule  (Read 8690 times)

AdrianC

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Re: For those who follow the 4% rule
« Reply #100 on: February 20, 2017, 07:38:58 AM »
Heading a bit off topic, inspired by the graphs...I was talking with my dad last night, telling him about this project I'm working on and how they changed the schedule so a nice and easy part time gig turned into a full time frenzy. It ain't right, me being semi retired and all. He was laughing. He started full time work off the farm at age 15 and retired at age 72, after he was daignosed with kidney failure and began dialysis.

Working is easy, we both agreed. An easy default. He is surprisingly in favor  of my semi retirement, but skeptical that I will fully retire, pretty much ever. I am a chip off the old block it is true and was raised in this workaholic environment. I am determined not to follow in his footsteps on this.

Thanks again y'all for the inspiring discussions (this and other threads).

Retire-Canada

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Re: For those who follow the 4% rule
« Reply #101 on: February 20, 2017, 08:26:02 AM »
I'm glad you are resisting the pull to work too long. I think a lot of people equate retiring with sloth. Personally I'll be far more physically active once I FIRE than now. I'll be just as busy. The only difference will be that I'll be doing things I enjoy. I'll also be spending a lot less time sitting at a desk, which will be great for my health.

spartana

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Re: For those who follow the 4% rule
« Reply #102 on: February 20, 2017, 09:43:08 AM »
I'm glad you are resisting the pull to work too long. I think a lot of people equate retiring with sloth. Personally I'll be far more physically active once I FIRE than now. I'll be just as busy. The only difference will be that I'll be doing things I enjoy. I'll also be spending a lot less time sitting at a desk, which will be great for my health.
^ This. I've had WAY more problems trying to convince people that eatly retirement doesn't equal sloth/inactivity/boredoom/loneliness/social disconnect/unproductive/unchallenging/etc... than I've had trying to convince people about the financial soundness of retiring early. My ER is pretty full most if the time and MUCH more interesting, challenging and fun than my working life was (and I had a pretty cool outdoors job too). Now if this endless rain.will stop then I can get out there again! This west coast deluge is getting old.
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Re: For those who follow the 4% rule
« Reply #103 on: February 20, 2017, 12:07:40 PM »
Spartana, you and the rest of my Left Coast Mustachean friends stay safe out there.

spartana

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Re: For those who follow the 4% rule
« Reply #104 on: February 20, 2017, 10:53:00 PM »
Spartana, you and the rest of my Left Coast Mustachean friends stay safe out there.
Not too bad here in SoCal (at least not in my area) but bad up north. Although it sounds like the SE and Midwest are getting hammered pretty bad.
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arebelspy

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Re: For those who follow the 4% rule
« Reply #105 on: February 21, 2017, 03:36:10 PM »
God, those are good graphs maizeman.

Thanks for taking the time to share!



Chance of running out of money before death is 2.4%, less than half what the same withdrawal rate provides at 30.

Wow.  That red is such a tiny sliver.  Compare that to the grey, ugh.

And people work OMY for several MY worrying about that tiny red slice (which itself can be mitigated via income or cutting expenses).  How sad.
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spartana

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Re: For those who follow the 4% rule
« Reply #106 on: February 22, 2017, 05:53:53 PM »
God, those are good graphs maizeman.

Thanks for taking the time to share!



Chance of running out of money before death is 2.4%, less than half what the same withdrawal rate provides at 30.

Wow.  That red is such a tiny sliver.  Compare that to the grey, ugh.

And people work OMY for several MY worrying about that tiny red slice (which itself can be mitigated via income or cutting expenses).  How sad.
I can't even see a sliver of the red line (of doom?!) on my phone so must be very tiny indeed. And that graph doesn't cover the possibility and greater likelihood of disability and inability due to aging . Death might not be the only problem you have if waiting too long to retire. Pretty sure the 25 years in retirement between 40 and 65 I'm going to have will be much more physically and mentally fit and healthy than the 25 years between 65 and (gulp) 90.
« Last Edit: February 22, 2017, 05:55:40 PM by spartana »
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rachael talcott

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Re: For those who follow the 4% rule
« Reply #107 on: February 22, 2017, 09:18:42 PM »
I realize that I'm late to this party, but at one point I shared UM's concerns, so I'm sympathetic. I was running 60 year retirement scenarios in FIREcalc, and using the standard 4% withdrawal rate, the probability of success was coming out at about 83%.  But adding in expected social security brought that up to 91%, and changing the fees in the calculator from .15 to .05% (Some Vanguard funds are .03%) brought it to 97%. The exact numbers will differ by how long you have until SS and how much you're going to get, but those are known quantities that can be accounted for. 

I also find Michael Kitces' argument for increasing withdrawal rates above 4% when the CAPE is at average-to-low levels compelling: https://www.kitces.com/wp-content/uploads/2014/11/Kitces-Report-May-2008.pdf.  He tells a hypothetical story about two couples with identical retirement portfolios.  One decides to retire immediately using 4% SWR.  The other decides to work one more year.  In the intervening year, the market has a moderately severe downturn.  So now the second couple, following the 4% rule, actually withdraws less than the first couple even thought they have a larger net worth.  That doesn't seem right.  Kitces' resolution to this paradox is to point out that there is a strong inverse correlation between CAPE and SWR.  The second couple could withdraw more than 4% because after the downturn the CAPE is lower, allowing for a higher SWR. 

As far as I know, there is no calculator that would allow me to run a 60-year scenario with withdrawal rates increased above 4% based on the CAPE, but once I'm retired, I'll have time to run the numbers myself. 

BeginnerStache

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Re: For those who follow the 4% rule
« Reply #108 on: February 23, 2017, 12:14:03 PM »
God, those are good graphs maizeman.

Thanks for taking the time to share!



Chance of running out of money before death is 2.4%, less than half what the same withdrawal rate provides at 30.

Wow.  That red is such a tiny sliver.  Compare that to the grey, ugh.

And people work OMY for several MY worrying about that tiny red slice (which itself can be mitigated via income or cutting expenses).  How sad.
I can't even see a sliver of the red line (of doom?!) on my phone so must be very tiny indeed. And that graph doesn't cover the possibility and greater likelihood of disability and inability due to aging . Death might not be the only problem you have if waiting too long to retire. Pretty sure the 25 years in retirement between 40 and 65 I'm going to have will be much more physically and mentally fit and healthy than the 25 years between 65 and (gulp) 90.

+1. Although not retired yet (soon to be a part-timer), I already know I will be way more physically active with less cubicle time. Barring some unforeseen catastrophe, 90 is a likelihood as I have 3 grandparents in their 90s and still mentally competent. One is approaching 100.


AZryan

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Re: For those who follow the 4% rule
« Reply #109 on: February 23, 2017, 01:59:32 PM »
rachael talcott,

I think you mainly should focus on 'sequence of returns' risk. Your first decade in retirement is what will set up the rest of your results, and you'll know long before you hit even 20 years of retirement if it's failing.
Being adaptable and proactive during that timeframe is just about all anyone needs to do.

CAPE can be helpful, but how it's measured is not the same as it was, so it's not historically consistent. Don't have the link, but there was a detailed rundown on it that made the case that the historical avg. of ~16 should probably be considered ~20 as it's measured now.

So with CAPE ~29, things are overvalued, but not quite as much as it seems. In 30 years, it almost never dropped down to that old avg., much less gone below it. Even after the 'lost decade' of the 2000's dot com bust and huge 2008 crash, CAPE only touched ~15 for a blip before shooting back up. Unless you think that means we're in for a GIGANTIC reversion that will devastate the market for the next 30+ years, I think CAPE's not very helpful or that predictive going forward.

markbike528CBX

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Re: For those who follow the 4% rule
« Reply #110 on: February 24, 2017, 12:29:54 AM »
+1. Although not retired yet (soon to be a part-timer), I already know I will be way more physically active with less cubicle time. Barring some unforeseen catastrophe, 90 is a likelihood as I have 3 grandparents in their 90s and still mentally competent. One is approaching 100.

Howard family members have this problem....   :-)
https://en.wikipedia.org/wiki/Howard_families

My oldest known ancestor died at 92 (great grandmother), every body else at less than 86 (paternal grandfather).  My wife's female ancestors are much older, so I'm setting 96 as her date (she said so, must obey).  Let the great grandkids-to-be fight over the inheritance.

AdrianC

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Re: For those who follow the 4% rule
« Reply #111 on: February 24, 2017, 03:06:28 AM »
God, those are good graphs maizeman.

Thanks for taking the time to share!



Chance of running out of money before death is 2.4%, less than half what the same withdrawal rate provides at 30.

Wow.  That red is such a tiny sliver.  Compare that to the grey, ugh.

And people work OMY for several MY worrying about that tiny red slice (which itself can be mitigated via income or cutting expenses).  How sad.

I keep coming back to it. What a great illustration.

So I went to help an old client this week. Two nights away from home turned into three, most of the last one spent at the plant, programming on the fly, total seat of the pants stuff. And to top it of I had a toothache. All to make $6k that I don't even need*. I have to get free from this toxic mindset.

* OK, so it's more than that. Yes, they called me because they knew I'd fix it. And I did. And yes, it was gratifying. But I get the same, or better, gratification doing a 50 mile bike ride, and I know which one is better for me, mentally and physically.

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Re: For those who follow the 4% rule
« Reply #112 on: February 24, 2017, 06:41:38 AM »
I keep coming back to it. What a great illustration.

So I went to help an old client this week. Two nights away from home turned into three, most of the last one spent at the plant, programming on the fly, total seat of the pants stuff. And to top it of I had a toothache. All to make $6k that I don't even need*. I have to get free from this toxic mindset.

* OK, so it's more than that. Yes, they called me because they knew I'd fix it. And I did. And yes, it was gratifying. But I get the same, or better, gratification doing a 50 mile bike ride, and I know which one is better for me, mentally and physically.
It's still a momentary surprise when a money-motivated situation presents itself and I realize that I'm not interested because we have enough already. My wife will be leaving her job soon and we were just talking last night about how they could double her salary from $75,000 to $150,000, which they'd never offer anyway, and she still wouldn't be interested. It kinda feels like wielding a superpower because our society is built on the concept that people need more money, and we're pretty much immune to it at this point.
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BeginnerStache

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Re: For those who follow the 4% rule
« Reply #113 on: February 24, 2017, 06:55:35 AM »
God, those are good graphs maizeman.

Thanks for taking the time to share!



Chance of running out of money before death is 2.4%, less than half what the same withdrawal rate provides at 30.

Wow.  That red is such a tiny sliver.  Compare that to the grey, ugh.

And people work OMY for several MY worrying about that tiny red slice (which itself can be mitigated via income or cutting expenses).  How sad.

I keep coming back to it. What a great illustration.

So I went to help an old client this week. Two nights away from home turned into three, most of the last one spent at the plant, programming on the fly, total seat of the pants stuff. And to top it of I had a toothache. All to make $6k that I don't even need*. I have to get free from this toxic mindset.

* OK, so it's more than that. Yes, they called me because they knew I'd fix it. And I did. And yes, it was gratifying. But I get the same, or better, gratification doing a 50 mile bike ride, and I know which one is better for me, mentally and physically.

If you don't mind me asking, PLC programming?

maizeman

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Re: For those who follow the 4% rule
« Reply #114 on: February 24, 2017, 06:56:59 AM »
It's still a momentary surprise when a money-motivated situation presents itself and I realize that I'm not interested because we have enough already. My wife will be leaving her job soon and we were just talking last night about how they could double her salary from $75,000 to $150,000, which they'd never offer anyway, and she still wouldn't be interested. It kinda feels like wielding a superpower because our society is built on the concept that people need more money, and we're pretty much immune to it at this point.

You've been FI for a while now, if I remember right, do you have a sense of how long it took you for the new not-moved-by-money mindset to set it? It does indeed sound like a superpower, and something I hope to develop myself once I hit my own magic number.
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AdrianC

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Re: For those who follow the 4% rule
« Reply #115 on: February 24, 2017, 07:19:23 AM »
If you don't mind me asking, PLC programming?

Yes. CLX and ME on this one. Hacking away at someone else's poorly commented programs, as per usual.
« Last Edit: February 24, 2017, 07:40:48 AM by AdrianC »

BeginnerStache

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Re: For those who follow the 4% rule
« Reply #116 on: February 24, 2017, 07:28:42 AM »

If you don't mind me asking, PLC programming?

Yes. CLX and ME on this one. Hacking away at someone else's poorly commented programs, as per usual.

That always pisses me off getting a program with zero/minimal comments.

Related question, do you seek opportunities to earn some side money programming? I am getting ready to ask my employer to switch to a part time (work from home) roll and was wondering about part time gigs programming if they don't bite . I also do HMI, CAD and unfortunately learned Siemens a couple years ago. Been trying to get that out of my head for a while. AB is MUCH easier.

Sorry for the thread hijack!

AdrianC

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Re: For those who follow the 4% rule
« Reply #117 on: February 24, 2017, 07:29:48 AM »
It's still a momentary surprise when a money-motivated situation presents itself and I realize that I'm not interested because we have enough already. My wife will be leaving her job soon and we were just talking last night about how they could double her salary from $75,000 to $150,000, which they'd never offer anyway, and she still wouldn't be interested. It kinda feels like wielding a superpower because our society is built on the concept that people need more money, and we're pretty much immune to it at this point.

Yeah, Iíve been so driven to make money for so long I have a hard time turning it off. Lucky for me, in a way, some of my bigger clients are retiring themselves (all older than me) and I havenít been schmoozing the new guys, so enquiries for new work are slowing down. Iíve been part time since about Oct 2015. Before that I was averaging >50 billable per week for many years, which is how we got to be FI, of course.

AdrianC

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Re: For those who follow the 4% rule
« Reply #118 on: February 24, 2017, 07:41:21 AM »

Related question, do you seek opportunities to earn some side money programming? I am getting ready to ask my employer to switch to a part time (work from home) roll and was wondering about part time gigs programming if they don't bite . I also do HMI, CAD and unfortunately learned Siemens a couple years ago. Been trying to get that out of my head for a while. AB is MUCH easier.

Sorry for the thread hijack!

I'll send you a PM.

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Re: For those who follow the 4% rule
« Reply #119 on: February 24, 2017, 07:51:05 AM »
I keep coming back to it. What a great illustration.

So I went to help an old client this week. Two nights away from home turned into three, most of the last one spent at the plant, programming on the fly, total seat of the pants stuff. And to top it of I had a toothache. All to make $6k that I don't even need*. I have to get free from this toxic mindset.

* OK, so it's more than that. Yes, they called me because they knew I'd fix it. And I did. And yes, it was gratifying. But I get the same, or better, gratification doing a 50 mile bike ride, and I know which one is better for me, mentally and physically.
It's still a momentary surprise when a money-motivated situation presents itself and I realize that I'm not interested because we have enough already. My wife will be leaving her job soon and we were just talking last night about how they could double her salary from $75,000 to $150,000, which they'd never offer anyway, and she still wouldn't be interested. It kinda feels like wielding a superpower because our society is built on the concept that people need more money, and we're pretty much immune to it at this point.
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Re: For those who follow the 4% rule
« Reply #120 on: February 24, 2017, 10:45:53 AM »
It's still a momentary surprise when a money-motivated situation presents itself and I realize that I'm not interested because we have enough already. My wife will be leaving her job soon and we were just talking last night about how they could double her salary from $75,000 to $150,000, which they'd never offer anyway, and she still wouldn't be interested. It kinda feels like wielding a superpower because our society is built on the concept that people need more money, and we're pretty much immune to it at this point.

You've been FI for a while now, if I remember right, do you have a sense of how long it took you for the new not-moved-by-money mindset to set it? It does indeed sound like a superpower, and something I hope to develop myself once I hit my own magic number.
I think it started once we realized we were bare bones FI and got stronger as we got closer to our desired FI target. When I think about her salary doubling the first thought is still, "That's a lot of cake!" But then I think about what price she pays to make any money period. Shitty commute, inflexible work hours, a company that doesn't let their employees telecommute even though they have the capability, etc. She hasn't quit yet because she likes the actual work and the ladies she works but she's getting closer to that point. As the notion of earning more money regardless of the cost loses it's incentive, it becomes no different than being paid in anything else that has little or no value to you. Like being paid in gum if you only chewed a pack or two a year. I suppose at least the money can still be spent if we want to spend it.

Edit: typo
« Last Edit: February 24, 2017, 12:06:05 PM by Mr. Green »
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Eric

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Re: For those who follow the 4% rule
« Reply #121 on: February 24, 2017, 10:49:36 AM »
CAPE can be helpful, but how it's measured is not the same as it was, so it's not historically consistent. Don't have the link, but there was a detailed rundown on it that made the case that the historical avg. of ~16 should probably be considered ~20 as it's measured now.

This is a pretty good read:

http://www.philosophicaleconomics.com/2013/12/shiller/
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Re: For those who follow the 4% rule
« Reply #122 on: February 24, 2017, 11:40:27 AM »
"Like being paid in gum if you only chewed a pack or two a year."  So good.