Race from $2M to $4M...and Beyond!

[secondcor521]

I think it's the standard "markets could be worse in the future / Japan / asteroid / this time it's different (and worse)" argument.  It is a legitimate point, but I agree that 1% is likely overkill.

[EscapeVelocity2020]

4% is like driving while looking thru the rearview mirror.  There are several assumptions underlying the 4% rule which are not guaranteed to be true going forward, volatility of returns and distribution of future returns (skewed or normal).  With bond yields near 1%, I'd advocate a 1% SWR, when rates are near 4%, SWR of 4% will work.

I can only comment on what I did.  I went all cash at my SWR and kept money in the market I probably won't need, assuming toilet paper doesn't cost $100/roll in a few years due to inflation.       

1% as a safe withdrawal rate is about as pessimistic view of the future as I have ever heard. I am too optimistic to get on board with that view of the future….. and also not rich enough to be happy spending so little of my stash. Each to one’s own I suppose.

ERE Jacob is well below 1% SWR.  4% for longer than 30 years presents all kinds of estimation issues and why I'm at around 1%.

The good news is, today DaTrill would be up 2 years of withdrawals, assuming ~80/20 AA...

[itchyfeet]

The good news is, today DaTrill would be up 2 years of withdrawals, assuming ~80/20 AA...

You can’t look at just one day, the S&P is down more than 7% this year, so Datrill only has 92 years of savings left!!!!! ……albeit assuming he never gets paid another dividend, and with 2022 s&P500 earnings growth expected to be more than 20% I remain hopeful that datrill will get a few dividends over the next 92 years to ensure his stash will grow into perpetuity.

[EscapeVelocity2020]

The good news is, today DaTrill would be up 2 years of withdrawals, assuming ~80/20 AA...

You can’t look at just one day, the S&P is down more than 7% this year, so Datrill only has 92 years of savings left!!!!! ……albeit assuming he never gets paid another dividend, and with 2022 s&P500 earnings growth expected to be more than 20% I remain hopeful that datrill will get a few dividends over the next 92 years to ensure his stash will grow into perpetuity.

Good points!  I’m also erroneously assuming 30 years, with a sufficiently pessimistic attitude, I doubt that’s the case.  But he is FI, so there’s that…

[rmorris50]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?


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[secondcor521]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?

I don't know how other people use the term, but for me I calculate WR as actual spending divided by FIRE stash.  So buying groceries would be actual spending and thus part of my WR.  Moving money between accounts is just a transfer to me, and thus pretty much ignored.  Of course things like Roth conversions or realizing capital gains has tax impacts, which can result in taxes paid, which I also count as actual spending and thus part of my WR.

Very roughly speaking, WR can be a first gauge at whether someone is spending sustainably.  Of course age, risk tolerance, spending flexibility, life expectancy, AA, and a whole host of other factors enter into play.  But if I say I'm 52 and have a WR of about 1%, one can pretty safely conclude that I'm being reasonably safe and probably too conservative.

[jeroly]

I think it's the standard "markets could be worse in the future / Japan / asteroid / this time it's different (and worse)" argument.  It is a legitimate point, but I agree that 1% is likely overkill.

If you don't care about leaving an estate, you can put all your money into TIPS and get inflation protection, pulling out 1/N each year where N= number of years in retirement.  So for example if you expect a 50 year retirement you can lock in a 2% WR, 3.33% for a 30 year retirement.

[DaTrill]

I must apologise but I don’t quite get your point.

The 4% rule is based on a historic review of the maximum you could drawdown annually over am30 year period without running out of money.

History had period of poor sequences of returns, be it months like in your example above or years.

I doubt many on this thread would argue with you that 4% may not be safe in the future, amd maybe something lower like 3.5% or 3.3% might even be tested in time. But so far 4% has been as bad as it gets.

Going from “4% may no longer prove to be safe” to “you should plan on drawing only 1%” is extreme however.

The only point is small changes in unmeasured return characteristics can take a good plan and ruin it.  "Past performance is no guarantee of future returns" 

[DaTrill]

Beg value    $100,000
Return Jan-Jun   -6.00%
Monthly   -0.50%
Return Jul-Dec   8.77%
Monthly   0.73%
SWR   4%
Mon SWR   0.003333333
   

I would love to see a rational explanation for why the market would act like this year after year after year after year, enough so it would cause a portfolio to fail.  Otherwise, I'm not going to care.

The market doesn't have to do this every year, just a few years in a row, around 5 or 5 of 7, 6 of 8, to fail the 4%.  Do you know inter year market returns for the next 40 years?  Please share. 

[DaTrill]

Below took a few minutes......

Sorry you lost me.    Let me add that if you eat turkey on Thanksgiving you may be sleepy sometime later.

So you are saying SORR may be an issue so go with a 1% or less WR.   

What is your point? Go read the SWR thread!

Can you run a few more scenarios where returns are between -50% and +50% with inflation included both in an actual historical context and completely random context for 30 year periods.  Oh yeah, would you also be able to run some with variable spending parameters like when markets may be up or down.   O oh oh..also how about like 60/40 75/25 or at least  5 other different AAs.   I am just curious what the results would be as it may help me draw some conclusions while reserving my right to be flexible but accept my own person risk.

Can't wait for the results as it will be super helpful!

Thanks in advance.

T

Why?  4% rule has many assumptions that are most likely not true for a forward-looking estimation.  Ignore this at your own peril. 

[DaTrill]

The good news is, today DaTrill would be up 2 years of withdrawals, assuming ~80/20 AA...

You can’t look at just one day, the S&P is down more than 7% this year, so Datrill only has 92 years of savings left!!!!! ……albeit assuming he never gets paid another dividend, and with 2022 s&P500 earnings growth expected to be more than 20% I remain hopeful that datrill will get a few dividends over the next 92 years to ensure his stash will grow into perpetuity.

Hope I have 92 years in cash and that it lasts this long.   

One of the more ironic observations is the number of very high net worth Wall Street and related investment professionals who hold nearly 100% cash/ST CD's and such.  I just took my post March 2020 gains and put that in cash.  Still have the same equity exposure (a little more) than I did in March 2020.  I took my equity market stimulus check and converted it into cash.  Others continue to let the equity stimulus ride.  Just took race to $4 mil off the table after being one good year from that goal.       

[DaTrill]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?

I don't know how other people use the term, but for me I calculate WR as actual spending divided by FIRE stash.  So buying groceries would be actual spending and thus part of my WR.  Moving money between accounts is just a transfer to me, and thus pretty much ignored.  Of course things like Roth conversions or realizing capital gains has tax impacts, which can result in taxes paid, which I also count as actual spending and thus part of my WR.

Very roughly speaking, WR can be a first gauge at whether someone is spending sustainably.  Of course age, risk tolerance, spending flexibility, life expectancy, AA, and a whole host of other factors enter into play.  But if I say I'm 52 and have a WR of about 1%, one can pretty safely conclude that I'm being reasonably safe and probably too conservative.

After aggressively playing with some of the 4% assumptions, 1.2% SWR and lower never fails (except fat tails).  This includes a skewed return distribution, higher volatility of returns, lower real return.  Did not include fat tails as I assume this will bust all plans.  Fat tail would be up 50%, then down 50%, up 50% down 50% and repeat until all SWR fail.  2% is relatively safe, 3% and 4% fail with small changes in above estimation characteristics over 50-year time periods (FIRE durations).     

[rmorris50]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?

I don't know how other people use the term, but for me I calculate WR as actual spending divided by FIRE stash.  So buying groceries would be actual spending and thus part of my WR.  Moving money between accounts is just a transfer to me, and thus pretty much ignored.  Of course things like Roth conversions or realizing capital gains has tax impacts, which can result in taxes paid, which I also count as actual spending and thus part of my WR.

Very roughly speaking, WR can be a first gauge at whether someone is spending sustainably.  Of course age, risk tolerance, spending flexibility, life expectancy, AA, and a whole host of other factors enter into play.  But if I say I'm 52 and have a WR of about 1%, one can pretty safely conclude that I'm being reasonably safe and probably too conservative.

Agreed, thus why it should be called a spend rate or expense ratio, not withdrawal rate.


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[rmorris50]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?

I don't know how other people use the term, but for me I calculate WR as actual spending divided by FIRE stash.  So buying groceries would be actual spending and thus part of my WR.  Moving money between accounts is just a transfer to me, and thus pretty much ignored.  Of course things like Roth conversions or realizing capital gains has tax impacts, which can result in taxes paid, which I also count as actual spending and thus part of my WR.

Very roughly speaking, WR can be a first gauge at whether someone is spending sustainably.  Of course age, risk tolerance, spending flexibility, life expectancy, AA, and a whole host of other factors enter into play.  But if I say I'm 52 and have a WR of about 1%, one can pretty safely conclude that I'm being reasonably safe and probably too conservative.

After aggressively playing with some of the 4% assumptions, 1.2% SWR and lower never fails (except fat tails).  This includes a skewed return distribution, higher volatility of returns, lower real return.  Did not include fat tails as I assume this will bust all plans.  Fat tail would be up 50%, then down 50%, up 50% down 50% and repeat until all SWR fail.  2% is relatively safe, 3% and 4% fail with small changes in above estimation characteristics over 50-year time periods (FIRE durations).     

Being this safe feels like the equivalent of driving an army tank around the city to avoid getting hurt in a car accident. I guess there is a chance someone could fire a bazooka at ya and maybe then tank would help then?

Heck, maybe all of us in this thread are already in our own army tank and we don’t even recognize it :-)


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[EscapeVelocity2020]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?

I don't know how other people use the term, but for me I calculate WR as actual spending divided by FIRE stash.  So buying groceries would be actual spending and thus part of my WR.  Moving money between accounts is just a transfer to me, and thus pretty much ignored.  Of course things like Roth conversions or realizing capital gains has tax impacts, which can result in taxes paid, which I also count as actual spending and thus part of my WR.

Very roughly speaking, WR can be a first gauge at whether someone is spending sustainably.  Of course age, risk tolerance, spending flexibility, life expectancy, AA, and a whole host of other factors enter into play.  But if I say I'm 52 and have a WR of about 1%, one can pretty safely conclude that I'm being reasonably safe and probably too conservative.

After aggressively playing with some of the 4% assumptions, 1.2% SWR and lower never fails (except fat tails).  This includes a skewed return distribution, higher volatility of returns, lower real return.  Did not include fat tails as I assume this will bust all plans.  Fat tail would be up 50%, then down 50%, up 50% down 50% and repeat until all SWR fail.  2% is relatively safe, 3% and 4% fail with small changes in above estimation characteristics over 50-year time periods (FIRE durations).     

Being this safe feels like the equivalent of driving an army tank around the city to avoid getting hurt in a car accident. I guess there is a chance someone could fire a bazooka at ya and maybe then tank would help then?
Heck, maybe all of us in this thread are already in our own army tank and we don’t even recognize it :-)
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If only temporal fears (e.g. fears about what life and The Market will be doing 30 years from now) could be made so simple as these physical, imminent fears...  That's why this stuff is so 'discussable' - like a game of Chess (but exponentially more complex).  Unfortunately, I do not foresee DaTrill to be the FI version of Magnus Carlsen.  But I also think MMM has run his course...

[itchyfeet]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

[couponvan]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

This! Our original was $2.0MM and a paid off house with the kids through college. We are technically there except the kids through college, so onward and level. I paused working in 2019, but the DH still works. Limbo land for at least another year. Our college spend is insane! Once that is finished I think we will have a much better idea of the true 25X.

[tooqk4u22]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

This! Our original was $2.0MM and a paid off house with the kids through college. We are technically there except the kids through college, so onward and level. I paused working in 2019, but the DH still works. Limbo land for at least another year. Our college spend is insane! Once that is finished I think we will have a much better idea of the true 25X.

Yeah, not looking forward to college spend with three kids but have put aside a bunch of $ that we don't include in our stash but it's probably still not enough.

[dividendman]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

This! Our original was $2.0MM and a paid off house with the kids through college. We are technically there except the kids through college, so onward and level. I paused working in 2019, but the DH still works. Limbo land for at least another year. Our college spend is insane! Once that is finished I think we will have a much better idea of the true 25X.

Yeah, not looking forward to college spend with three kids but have put aside a bunch of $ that we don't include in our stash but it's probably still not enough.

There's an easy way around this... have them pay for their own education. Also, not everyone has to go to college.

[ixtap]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

This! Our original was $2.0MM and a paid off house with the kids through college. We are technically there except the kids through college, so onward and level. I paused working in 2019, but the DH still works. Limbo land for at least another year. Our college spend is insane! Once that is finished I think we will have a much better idea of the true 25X.

Yeah, not looking forward to college spend with three kids but have put aside a bunch of $ that we don't include in our stash but it's probably still not enough.

There's an easy way around this... have them pay for their own education. Also, not everyone has to go to college.

A self funded gap year could make a huge difference in funding. It isn't all that easy to get yourself declared a non traditional student if you are under 25, and I certainly don't recommend anyone take the route I did (bad marriage), but it can open up some additional funding options.

[couponvan]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

This! Our original was $2.0MM and a paid off house with the kids through college. We are technically there except the kids through college, so onward and level. I paused working in 2019, but the DH still works. Limbo land for at least another year. Our college spend is insane! Once that is finished I think we will have a much better idea of the true 25X.

Yeah, not looking forward to college spend with three kids but have put aside a bunch of $ that we don't include in our stash but it's probably still not enough.

There's an easy way around this... have them pay for their own education. Also, not everyone has to go to college.

A self funded gap year could make a huge difference in funding. It isn't all that easy to get yourself declared a non traditional student if you are under 25, and I certainly don't recommend anyone take the route I did (bad marriage), but it can open up some additional funding options.

This is part of our financial plan, so it’s saved/ budgeted for. Both DH and I didn’t get the benefit of family funding our college, and we don’t want that for our kids. We make WAY too much money for them to receive any kind of aid for school, so it isn’t really fair to tell them to pay for it when we can afford it. Our affluence is due to college educations in fields that are lucrative.

DH was going to quit in 2022, but found a new job last year for a start up that pays much less and for a 2 year contract. He got severance from his last position that fully funded the education. He’s satisfying a major itch he always had to “work at a start up”. So I am going along with it since it makes him happy.

[tooqk4u22]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

This! Our original was $2.0MM and a paid off house with the kids through college. We are technically there except the kids through college, so onward and level. I paused working in 2019, but the DH still works. Limbo land for at least another year. Our college spend is insane! Once that is finished I think we will have a much better idea of the true 25X.

Yeah, not looking forward to college spend with three kids but have put aside a bunch of $ that we don't include in our stash but it's probably still not enough.

There's an easy way around this... have them pay for their own education. Also, not everyone has to go to college.

A self funded gap year could make a huge difference in funding. It isn't all that easy to get yourself declared a non traditional student if you are under 25, and I certainly don't recommend anyone take the route I did (bad marriage), but it can open up some additional funding options.

This is part of our financial plan, so it’s saved/ budgeted for. Both DH and I didn’t get the benefit of family funding our college, and we don’t want that for our kids. We make WAY too much money for them to receive any kind of aid for school, so it isn’t really fair to tell them to pay for it when we can afford it. Our affluence is due to college educations in fields that are lucrative.

DH was going to quit in 2022, but found a new job last year for a start up that pays much less and for a 2 year contract. He got severance from his last position that fully funded the education. He’s satisfying a major itch he always had to “work at a start up”. So I am going along with it since it makes him happy.

That's how we feel too.  We both paid our own way with loans, got good jobs and worked hard/smart to work our way up the ladder and income.  It would seem highly selfish to me to FIRE and not plan for higher education at some level, doesn't have to be all of it.

I also agree that college isn't for everyone but that shouldn't preclude planning for it bc by the time they are college age and want to go it's too late at that point.   

Not to mention it's still possible we have them fund some of it or take out loans so they have a vested interest and pay them off later. 

[couponvan]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

This! Our original was $2.0MM and a paid off house with the kids through college. We are technically there except the kids through college, so onward and level. I paused working in 2019, but the DH still works. Limbo land for at least another year. Our college spend is insane! Once that is finished I think we will have a much better idea of the true 25X.

Yeah, not looking forward to college spend with three kids but have put aside a bunch of $ that we don't include in our stash but it's probably still not enough.

There's an easy way around this... have them pay for their own education. Also, not everyone has to go to college.

A self funded gap year could make a huge difference in funding. It isn't all that easy to get yourself declared a non traditional student if you are under 25, and I certainly don't recommend anyone take the route I did (bad marriage), but it can open up some additional funding options.

This is part of our financial plan, so it’s saved/ budgeted for. Both DH and I didn’t get the benefit of family funding our college, and we don’t want that for our kids. We make WAY too much money for them to receive any kind of aid for school, so it isn’t really fair to tell them to pay for it when we can afford it. Our affluence is due to college educations in fields that are lucrative.

DH was going to quit in 2022, but found a new job last year for a start up that pays much less and for a 2 year contract. He got severance from his last position that fully funded the education. He’s satisfying a major itch he always had to “work at a start up”. So I am going along with it since it makes him happy.

That's how we feel too.  We both paid our own way with loans, got good jobs and worked hard/smart to work our way up the ladder and income.  It would seem highly selfish to me to FIRE and not plan for higher education at some level, doesn't have to be all of it.

I also agree that college isn't for everyone but that shouldn't preclude planning for it bc by the time they are college age and want to go it's too late at that point.   

Not to mention it's still possible we have them fund some of it or take out loans so they have a vested interest and pay them off later.

I tell them I am funding timeshare weeks at their future homes. LOL. $50K is a good timeshare week, right? So we will have 3 weeks or so per kid. Sounds about right.

[BeanCounter]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

This! Our original was $2.0MM and a paid off house with the kids through college. We are technically there except the kids through college, so onward and level. I paused working in 2019, but the DH still works. Limbo land for at least another year. Our college spend is insane! Once that is finished I think we will have a much better idea of the true 25X.

Yeah, not looking forward to college spend with three kids but have put aside a bunch of $ that we don't include in our stash but it's probably still not enough.

There's an easy way around this... have them pay for their own education. Also, not everyone has to go to college.

A self funded gap year could make a huge difference in funding. It isn't all that easy to get yourself declared a non traditional student if you are under 25, and I certainly don't recommend anyone take the route I did (bad marriage), but it can open up some additional funding options.

This is part of our financial plan, so it’s saved/ budgeted for. Both DH and I didn’t get the benefit of family funding our college, and we don’t want that for our kids. We make WAY too much money for them to receive any kind of aid for school, so it isn’t really fair to tell them to pay for it when we can afford it. Our affluence is due to college educations in fields that are lucrative.

DH was going to quit in 2022, but found a new job last year for a start up that pays much less and for a 2 year contract. He got severance from his last position that fully funded the education. He’s satisfying a major itch he always had to “work at a start up”. So I am going along with it since it makes him happy.

That's how we feel too.  We both paid our own way with loans, got good jobs and worked hard/smart to work our way up the ladder and income.  It would seem highly selfish to me to FIRE and not plan for higher education at some level, doesn't have to be all of it.

I also agree that college isn't for everyone but that shouldn't preclude planning for it bc by the time they are college age and want to go it's too late at that point.   

Not to mention it's still possible we have them fund some of it or take out loans so they have a vested interest and pay them off later.

Agreed. Planning for college was part of our FIRE plan, and I wouldn't have REd if I thought that was in jeopardy. I can't not give my kids the same opportunities that I had. If they want to go a different direction that's fine I will help them do trade school and start their own business then.

[Much Fishing to Do]

Yes, I’d say pretty much all of us on this thread concluded we didn’t align with 100% of MMMs views.

Years ago I loved how simple MMM made early retirement look. 25x spending and the world your oyster. Somehow, it’s all become a bit more complicated than that. For me at least.

This! Our original was $2.0MM and a paid off house with the kids through college. We are technically there except the kids through college, so onward and level. I paused working in 2019, but the DH still works. Limbo land for at least another year. Our college spend is insane! Once that is finished I think we will have a much better idea of the true 25X.

Yeah, not looking forward to college spend with three kids but have put aside a bunch of $ that we don't include in our stash but it's probably still not enough.

There's an easy way around this... have them pay for their own education. Also, not everyone has to go to college.

A self funded gap year could make a huge difference in funding. It isn't all that easy to get yourself declared a non traditional student if you are under 25, and I certainly don't recommend anyone take the route I did (bad marriage), but it can open up some additional funding options.

This is part of our financial plan, so it’s saved/ budgeted for. Both DH and I didn’t get the benefit of family funding our college, and we don’t want that for our kids. We make WAY too much money for them to receive any kind of aid for school, so it isn’t really fair to tell them to pay for it when we can afford it. Our affluence is due to college educations in fields that are lucrative.

DH was going to quit in 2022, but found a new job last year for a start up that pays much less and for a 2 year contract. He got severance from his last position that fully funded the education. He’s satisfying a major itch he always had to “work at a start up”. So I am going along with it since it makes him happy.

That's how we feel too.  We both paid our own way with loans, got good jobs and worked hard/smart to work our way up the ladder and income.  It would seem highly selfish to me to FIRE and not plan for higher education at some level, doesn't have to be all of it.

I also agree that college isn't for everyone but that shouldn't preclude planning for it bc by the time they are college age and want to go it's too late at that point.   

Not to mention it's still possible we have them fund some of it or take out loans so they have a vested interest and pay them off later.

Agreed. Planning for college was part of our FIRE plan, and I wouldn't have REd if I thought that was in jeopardy. I can't not give my kids the same opportunities that I had. If they want to go a different direction that's fine I will help them do trade school and start their own business then.

My plan for helping my 3 kids did change quite a bit when my salary took off, as I could do so much with just a couple years of work.  I have a very bucketed FIRE plan and separate 529s that fully fund 4 years at the state U for each kid was part of that.  I've told the kids after college graduation to expect no further financial help from me, but they can have whatever money is leftover in the 529 upon graduation, plus I'll buy them a new car at a graduation present if they give me their word they'll never go into any debt other than a mortgage.  My oldest is on target to graduate with a very nice chunk left over in the 529 due to some good choices, some working, and some scholarships.

[Dicey]

How do you give someone the "leftover" 529 money? Doesn't it still have to be spent on education?

[BeanCounter]

How do you give someone the "leftover" 529 money? Doesn't it still have to be spent on education?

You can just pay the taxes on the cash out.

[secondcor521]

How do you give someone the "leftover" 529 money? Doesn't it still have to be spent on education?

You can just pay the taxes on the cash out.

There are a couple of options.

You can make the now-graduated young adult the owner of the account.  They can then disburse it themselves for graduate school.  Or they can keep it as a starter 529 for their future children's educations.  Both these options really mean that the money remains tax free and is spent on education as @Dicey is thinking.

Or you can disburse the money to them.  This is generally a non-qualified distribution.  To the extent not used for qualified educational expenses, the earnings portion of the distribution is subject to ordinary income tax (via Schedule 1 Line 8 Other income).  Note that it is the earnings portion only; any amount that is return of your contribution is not taxable at the federal level.  The earnings portion is provided in box 2 of Form 1099-Q.  Thus one generally does not have to pay taxes on all of the cash out.

There is a discrepancy between the law and the IRS publication on this, but if you do things a certain way, that other income is on the young adult's return, not the parents.  In this scenario, if you do the disbursement while they're still a student, then it probably gets taxed very lightly if at all because the student is likely to have a low-ish income.

Non-qualified distributions are also generally subject to a 10% penalty, calculated on Form 5329 Part II.  There are exceptions which can excuse the penalty.  My personal favorite is the scholarship exemption - all three of my kids earned enough scholarships for any non-qualified distributions to be exempt from the 10% penalty.  There are other exceptions as well.

There may also be state income tax ramifications for such distributions.  Check your state for details.

[Much Fishing to Do]

How do you give someone the "leftover" 529 money? Doesn't it still have to be spent on education?

You can just pay the taxes on the cash out.

There are a couple of options.

You can make the now-graduated young adult the owner of the account.  They can then disburse it themselves for graduate school.  Or they can keep it as a starter 529 for their future children's educations.  Both these options really mean that the money remains tax free and is spent on education as @Dicey is thinking.

Or you can disburse the money to them.  This is generally a non-qualified distribution.  To the extent not used for qualified educational expenses, the earnings portion of the distribution is subject to ordinary income tax (via Schedule 1 Line 8 Other income).  Note that it is the earnings portion only; any amount that is return of your contribution is not taxable at the federal level.  The earnings portion is provided in box 2 of Form 1099-Q.  Thus one generally does not have to pay taxes on all of the cash out.

There is a discrepancy between the law and the IRS publication on this, but if you do things a certain way, that other income is on the young adult's return, not the parents.  In this scenario, if you do the disbursement while they're still a student, then it probably gets taxed very lightly if at all because the student is likely to have a low-ish income.

Non-qualified distributions are also generally subject to a 10% penalty, calculated on Form 5329 Part II.  There are exceptions which can excuse the penalty.  My personal favorite is the scholarship exemption - all three of my kids earned enough scholarships for any non-qualified distributions to be exempt from the 10% penalty.  There are other exceptions as well.

There may also be state income tax ramifications for such distributions.  Check your state for details.

Great answers and kinda a summary of the things I'm thinking thru.  In the end, the fact that the penalty and taxes are only on the gains, and that I can decide between who to distribute it to for the tax calculation (me w/ very low FIRED income?  kid before full year of working so low income?) I'm already just assuming a penalty/tax hit but not as large as one may think.  And yes, the scholarship exemption also helps for our situation. In the end if I have cash on me at the time I may just give the kid cash and hold onto the 529 until I need it for one reason or another (which I would have thought would have been to go to grandchildren...but as of today at least all my kids tell me they are gonna remain single and childless ;-)  Maybe I'll just transfer the ownership of the 529 itself to the child and he can make those kinds of decisions (my youngest is already a money expert so he'd be a good one for that choice and let him figure it out.

[BeanCounter]

How do you give someone the "leftover" 529 money? Doesn't it still have to be spent on education?

You can just pay the taxes on the cash out.

There are a couple of options.

You can make the now-graduated young adult the owner of the account.  They can then disburse it themselves for graduate school.  Or they can keep it as a starter 529 for their future children's educations.  Both these options really mean that the money remains tax free and is spent on education as @Dicey is thinking.

Or you can disburse the money to them.  This is generally a non-qualified distribution.  To the extent not used for qualified educational expenses, the earnings portion of the distribution is subject to ordinary income tax (via Schedule 1 Line 8 Other income).  Note that it is the earnings portion only; any amount that is return of your contribution is not taxable at the federal level.  The earnings portion is provided in box 2 of Form 1099-Q.  Thus one generally does not have to pay taxes on all of the cash out.

There is a discrepancy between the law and the IRS publication on this, but if you do things a certain way, that other income is on the young adult's return, not the parents.  In this scenario, if you do the disbursement while they're still a student, then it probably gets taxed very lightly if at all because the student is likely to have a low-ish income.

Non-qualified distributions are also generally subject to a 10% penalty, calculated on Form 5329 Part II.  There are exceptions which can excuse the penalty.  My personal favorite is the scholarship exemption - all three of my kids earned enough scholarships for any non-qualified distributions to be exempt from the 10% penalty.  There are other exceptions as well.

There may also be state income tax ramifications for such distributions.  Check your state for details.

Hey I learned some new things! Thanks for posting this!

[DaTrill]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?

I don't know how other people use the term, but for me I calculate WR as actual spending divided by FIRE stash.  So buying groceries would be actual spending and thus part of my WR.  Moving money between accounts is just a transfer to me, and thus pretty much ignored.  Of course things like Roth conversions or realizing capital gains has tax impacts, which can result in taxes paid, which I also count as actual spending and thus part of my WR.

Very roughly speaking, WR can be a first gauge at whether someone is spending sustainably.  Of course age, risk tolerance, spending flexibility, life expectancy, AA, and a whole host of other factors enter into play.  But if I say I'm 52 and have a WR of about 1%, one can pretty safely conclude that I'm being reasonably safe and probably too conservative.

After aggressively playing with some of the 4% assumptions, 1.2% SWR and lower never fails (except fat tails).  This includes a skewed return distribution, higher volatility of returns, lower real return.  Did not include fat tails as I assume this will bust all plans.  Fat tail would be up 50%, then down 50%, up 50% down 50% and repeat until all SWR fail.  2% is relatively safe, 3% and 4% fail with small changes in above estimation characteristics over 50-year time periods (FIRE durations).     

Being this safe feels like the equivalent of driving an army tank around the city to avoid getting hurt in a car accident. I guess there is a chance someone could fire a bazooka at ya and maybe then tank would help then?

Heck, maybe all of us in this thread are already in our own army tank and we don’t even recognize it :-)


Sent from my iPhone using Tapatalk

I may estimate that I am more aware of bad outcomes due to random events.  People rarely share these but when one works in financial services for a time, you can see the carnage that occurs to good people.  I remember seeing a credit report of a guy that had several personal million dollar houses who couldn't get a car loan 5 years later.   

[DaTrill]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?

I don't know how other people use the term, but for me I calculate WR as actual spending divided by FIRE stash.  So buying groceries would be actual spending and thus part of my WR.  Moving money between accounts is just a transfer to me, and thus pretty much ignored.  Of course things like Roth conversions or realizing capital gains has tax impacts, which can result in taxes paid, which I also count as actual spending and thus part of my WR.

Very roughly speaking, WR can be a first gauge at whether someone is spending sustainably.  Of course age, risk tolerance, spending flexibility, life expectancy, AA, and a whole host of other factors enter into play.  But if I say I'm 52 and have a WR of about 1%, one can pretty safely conclude that I'm being reasonably safe and probably too conservative.

After aggressively playing with some of the 4% assumptions, 1.2% SWR and lower never fails (except fat tails).  This includes a skewed return distribution, higher volatility of returns, lower real return.  Did not include fat tails as I assume this will bust all plans.  Fat tail would be up 50%, then down 50%, up 50% down 50% and repeat until all SWR fail.  2% is relatively safe, 3% and 4% fail with small changes in above estimation characteristics over 50-year time periods (FIRE durations).     

Being this safe feels like the equivalent of driving an army tank around the city to avoid getting hurt in a car accident. I guess there is a chance someone could fire a bazooka at ya and maybe then tank would help then?
Heck, maybe all of us in this thread are already in our own army tank and we don’t even recognize it :-)
Sent from my iPhone using Tapatalk

If only temporal fears (e.g. fears about what life and The Market will be doing 30 years from now) could be made so simple as these physical, imminent fears...  That's why this stuff is so 'discussable' - like a game of Chess (but exponentially more complex).  Unfortunately, I do not foresee DaTrill to be the FI version of Magnus Carlsen.  But I also think MMM has run his course...

No fears, just recognizing the realities of the tape.  Meta is the third of the generals to get gapped down 20% in a day (tomorrow), this only happens in bear markets.  I will be much better if the market continues to rip, but recognizing that the stage is set for a grind lower.  Not a gloom and doomer, but 4% has worked well in a bull market.  There are many issues with the same strategy in a bear market for those in the bear market, not for one that is looking back in time.     

[Dicey]

In other news, while I no longer track things as closely as I did in the acquisition years, periodically I take a quick NW snapshot, typically calculated on a post-it note and then tossed. The prompt is usually a Redfin or Zillow ping detailing their revised estimate of property value. That happened this week, so I hastily checked estimates and account balances and scribbled some numbers. My hasty tally was shocking. I've been walking around in kind of a daze over it all week. (We're worth what??) Today I realized I hadn't subtracted the rental property mortgages. Whew!

I don't know if I'll ever get used to seeing these insanely high numbers. I am simply amazed at how well this shit works.

[BeanCounter]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?

I don't know how other people use the term, but for me I calculate WR as actual spending divided by FIRE stash.  So buying groceries would be actual spending and thus part of my WR.  Moving money between accounts is just a transfer to me, and thus pretty much ignored.  Of course things like Roth conversions or realizing capital gains has tax impacts, which can result in taxes paid, which I also count as actual spending and thus part of my WR.

Very roughly speaking, WR can be a first gauge at whether someone is spending sustainably.  Of course age, risk tolerance, spending flexibility, life expectancy, AA, and a whole host of other factors enter into play.  But if I say I'm 52 and have a WR of about 1%, one can pretty safely conclude that I'm being reasonably safe and probably too conservative.

After aggressively playing with some of the 4% assumptions, 1.2% SWR and lower never fails (except fat tails).  This includes a skewed return distribution, higher volatility of returns, lower real return.  Did not include fat tails as I assume this will bust all plans.  Fat tail would be up 50%, then down 50%, up 50% down 50% and repeat until all SWR fail.  2% is relatively safe, 3% and 4% fail with small changes in above estimation characteristics over 50-year time periods (FIRE durations).     

Being this safe feels like the equivalent of driving an army tank around the city to avoid getting hurt in a car accident. I guess there is a chance someone could fire a bazooka at ya and maybe then tank would help then?

Heck, maybe all of us in this thread are already in our own army tank and we don’t even recognize it :-)


Sent from my iPhone using Tapatalk

I may estimate that I am more aware of bad outcomes due to random events.  People rarely share these but when one works in financial services for a time, you can see the carnage that occurs to good people.  I remember seeing a credit report of a guy that had several personal million dollar houses who couldn't get a car loan 5 years later.   

Yeah, that isn't even remotely the same thing as suggesting that 1% is a safe WR. That's someone who was over leveraged, and it happens all the time.

If I use 1% as a my WR, with a net worth of $4M I'll have $40k a year to spend. Not bad, but that would be tight for our family of four. It would make my kids rich though. Meanwhile if I took the $4M (lets say I moved it to cash for fun) and divided it by the 50 years I'll likely be retired I could spend $80k per year.

If you really want to see how this stuff works go do a CFIRESIM calculation and dump down the results into excel and look at all the years it covers and the various outcomes for each data set. You can see each year that had negative returns and the dividends for those years etc.  Then explain to me why the future could be so drastically different than all the various past events.

Personally through the modeling I found that I feel most comfortable at a 2.75% WD. Then, if our portfolio takes a 30% haircut, we move up to a 4% WD until it recovers again. That also gives us wiggle room for all the unexpected events that will happen over the next 50 years. (should we be so lucky to live to see 95 and in good health)

[EscapeVelocity2020]

No fears, just recognizing the realities of the tape.  Meta is the third of the generals to get gapped down 20% in a day (tomorrow), this only happens in bear markets.  I will be much better if the market continues to rip, but recognizing that the stage is set for a grind lower.  Not a gloom and doomer, but 4% has worked well in a bull market.  There are many issues with the same strategy in a bear market for those in the bear market, not for one that is looking back in time.   

No fears?  Not a gloom and doomer?  You might want to check the tape...

Not that I don't have any sympathy for your expectation of tougher times ahead - this is an historic bull market that might be coming to an end - but 1% SWR is akin to saying we are just starting our Japan epoch.  Even if you were from the future and knew that were the case, saying that in advance lumps you in fretful doomers and gloomers.  Just own it.  Also, fill us in on what brilliant moves you are making along the way (I've seen you on the Top Is In thread), not this "in hindsight I did everything right" business.

[SwordGuy]

Well, the rollover of an old 401K to Vanguard went smoothly.   Prices went down 10% between the time the check was cut and it was turned back into the same S&P 500 fund.    So I got a bonus of 10% of shares on that set of investments.  :)   S&P 500 is down 5.8% for the year now, so we've made a gain on the transaction in dollar terms (for the moment).

Pure dumb luck on my part. :)

Speaking of pure dumb luck, the property valuations for our home, 4 rental houses, mortgage note on property we sold, and our inherited farmland are way higher than they were two years ago.

Dec 31, 2020:  $1,319,021
Feb  3, 2020:  $2,620,260

A big chunk of that is due to a more current valuation on the farmland.   Good farmland doesn't go up for sale very often so it's harder for people like me, 800 miles away, to properly value it.

But our rental homes are now valued at 2 to 3 times what we put into them to purchase them and make them rent-ready.   As we change tenants we'll be able to raise the rent a goodly bit.   (Don't really want to do that to current tenants.)

Even our personal home is valued at 25% more than we paid for it.   

Crazy times.   The valuations don't seem real to me but apparently, they are. 

[EscapeVelocity2020]

Well, the rollover of an old 401K to Vanguard went smoothly.   Prices went down 10% between the time the check was cut and it was turned back into the same S&P 500 fund.    So I got a bonus of 10% of shares on that set of investments.  :)   S&P 500 is down 5.8% for the year now, so we've made a gain on the transaction in dollar terms (for the moment).

Pure dumb luck on my part. :)

Speaking of pure dumb luck, the property valuations for our home, 4 rental houses, mortgage note on property we sold, and our inherited farmland are way higher than they were two years ago.

Dec 31, 2020:  $1,319,021
Feb  3, 2020:  $2,620,260

A big chunk of that is due to a more current valuation on the farmland.   Good farmland doesn't go up for sale very often so it's harder for people like me, 800 miles away, to properly value it.

But our rental homes are now valued at 2 to 3 times what we put into them to purchase them and make them rent-ready.   As we change tenants we'll be able to raise the rent a goodly bit.   (Don't really want to do that to current tenants.)

Even our personal home is valued at 25% more than we paid for it.   

Crazy times.   The valuations don't seem real to me but apparently, they are.

These are crazy times for real estate for sure, driven in a large part by low interest rates and generous borrowing terms.  If I were young and aspiring, I'd be buying up all the real estate I could get my hands on!  For those of us on the other side, I'm just glad I'm not in the market for buying a primary residence or trying to start out as a farmer.  Not a good place to be for the US long term, but when has anyone ever thought long term... LOL?

[SwordGuy]

@EscapeVelocity2020 , I would be far happier if every working person received a decent wage for their work, disabled or sick people got the health care they needed, the disabled were given a decent income because our society is composed of decent human beings with empathy, and everyone could afford a nice place to live, be it home ownership or renting (their choice).

But, hey, this is America, the land of "I got mine, so F* you!".   

I'll keep working and dreaming for the former, but the latter is what we've got right now.

[DaTrill]

Well, withdrawal rate doesn’t tell me much anyway. What does withdrawal mean anyway, moving money between accounts and potentially reclassifying tax status?

I don't know how other people use the term, but for me I calculate WR as actual spending divided by FIRE stash.  So buying groceries would be actual spending and thus part of my WR.  Moving money between accounts is just a transfer to me, and thus pretty much ignored.  Of course things like Roth conversions or realizing capital gains has tax impacts, which can result in taxes paid, which I also count as actual spending and thus part of my WR.

Very roughly speaking, WR can be a first gauge at whether someone is spending sustainably.  Of course age, risk tolerance, spending flexibility, life expectancy, AA, and a whole host of other factors enter into play.  But if I say I'm 52 and have a WR of about 1%, one can pretty safely conclude that I'm being reasonably safe and probably too conservative.

After aggressively playing with some of the 4% assumptions, 1.2% SWR and lower never fails (except fat tails).  This includes a skewed return distribution, higher volatility of returns, lower real return.  Did not include fat tails as I assume this will bust all plans.  Fat tail would be up 50%, then down 50%, up 50% down 50% and repeat until all SWR fail.  2% is relatively safe, 3% and 4% fail with small changes in above estimation characteristics over 50-year time periods (FIRE durations).     

Being this safe feels like the equivalent of driving an army tank around the city to avoid getting hurt in a car accident. I guess there is a chance someone could fire a bazooka at ya and maybe then tank would help then?

Heck, maybe all of us in this thread are already in our own army tank and we don’t even recognize it :-)


Sent from my iPhone using Tapatalk

I may estimate that I am more aware of bad outcomes due to random events.  People rarely share these but when one works in financial services for a time, you can see the carnage that occurs to good people.  I remember seeing a credit report of a guy that had several personal million dollar houses who couldn't get a car loan 5 years later.   

Yeah, that isn't even remotely the same thing as suggesting that 1% is a safe WR. That's someone who was over leveraged, and it happens all the time.

If I use 1% as a my WR, with a net worth of $4M I'll have $40k a year to spend. Not bad, but that would be tight for our family of four. It would make my kids rich though. Meanwhile if I took the $4M (lets say I moved it to cash for fun) and divided it by the 50 years I'll likely be retired I could spend $80k per year.

If you really want to see how this stuff works go do a CFIRESIM calculation and dump down the results into excel and look at all the years it covers and the various outcomes for each data set. You can see each year that had negative returns and the dividends for those years etc.  Then explain to me why the future could be so drastically different than all the various past events.

Personally through the modeling I found that I feel most comfortable at a 2.75% WD. Then, if our portfolio takes a 30% haircut, we move up to a 4% WD until it recovers again. That also gives us wiggle room for all the unexpected events that will happen over the next 50 years. (should we be so lucky to live to see 95 and in good health)

 CFIRESIM and other calculators I've seen (only started looking for about a year) make some assumptions we know are not true, mostly returns will be normally distributed and past return volatility will be the same as future return volatility (or worse, if fat tails appear which busts all FIRE plans and covered in "Statistical consequences of fat tails).  These are stats concepts covered in most introduction to stats courses, in several Nassim Taleb books and even Stats for Dummies I and II (which are an incredible books).   

Another assumption is that the last 100 years is a population of returns and not a sample.  If it's only a sample, then many corrections must be made to any estimate using the models.  Every calculator I've seen assume the last 100 years (or whatever time period used) is the population, meaning the markets have experienced all potential outcomes in the last 100 years, in other words, "History is over" which we know is not true.

These are boring stats critiques, but stats are used to generate these estimates and ignoring the weaknesses in the model is not wise.         

[DaTrill]

No fears, just recognizing the realities of the tape.  Meta is the third of the generals to get gapped down 20% in a day (tomorrow), this only happens in bear markets.  I will be much better if the market continues to rip, but recognizing that the stage is set for a grind lower.  Not a gloom and doomer, but 4% has worked well in a bull market.  There are many issues with the same strategy in a bear market for those in the bear market, not for one that is looking back in time.   

No fears?  Not a gloom and doomer?  You might want to check the tape...

Not that I don't have any sympathy for your expectation of tougher times ahead - this is an historic bull market that might be coming to an end - but 1% SWR is akin to saying we are just starting our Japan epoch.  Even if you were from the future and knew that were the case, saying that in advance lumps you in fretful doomers and gloomers.  Just own it.  Also, fill us in on what brilliant moves you are making along the way (I've seen you on the Top Is In thread), not this "in hindsight I did everything right" business.

Don't shoot the messenger.  I'm far far from ever ticking the top or bottom, but posted as I've basically taken $4 mil off the table and explained the NFLX gap down is the "ringing of the bell" for me.  I will be much richer and better off if this is a correction but having experienced several bear markets in many different asset classes, I posted my decision process. 

Roughly long the same equity as near the bottom of March 2020 (didn't track that closely) but also have as much cash as equity as the main reason IMHO for the rip from that point has been the Fed and they appear to be taking away the punchbowl.  This could be a head fake and JP might keep spiking the markets, but inflation is brutal and creeping up.   

[EscapeVelocity2020]

No fears, just recognizing the realities of the tape.  Meta is the third of the generals to get gapped down 20% in a day (tomorrow), this only happens in bear markets.  I will be much better if the market continues to rip, but recognizing that the stage is set for a grind lower.  Not a gloom and doomer, but 4% has worked well in a bull market.  There are many issues with the same strategy in a bear market for those in the bear market, not for one that is looking back in time.   

No fears?  Not a gloom and doomer?  You might want to check the tape...

Not that I don't have any sympathy for your expectation of tougher times ahead - this is an historic bull market that might be coming to an end - but 1% SWR is akin to saying we are just starting our Japan epoch.  Even if you were from the future and knew that were the case, saying that in advance lumps you in fretful doomers and gloomers.  Just own it.  Also, fill us in on what brilliant moves you are making along the way (I've seen you on the Top Is In thread), not this "in hindsight I did everything right" business.

Don't shoot the messenger.  I'm far far from ever ticking the top or bottom, but posted as I've basically taken $4 mil off the table and explained the NFLX gap down is the "ringing of the bell" for me.  I will be much richer and better off if this is a correction but having experienced several bear markets in many different asset classes, I posted my decision process. 

Roughly long the same equity as near the bottom of March 2020 (didn't track that closely) but also have as much cash as equity as the main reason IMHO for the rip from that point has been the Fed and they appear to be taking away the punchbowl.  This could be a head fake and JP might keep spiking the markets, but inflation is brutal and creeping up.   

That's just the thing though, when exactly did you take $4M 'off the table' and where is is positioned?  I'm well balanced, and I have a journal showing my moves in and out of the market.  You just kinda started posting when the market started to tank.

[tooqk4u22]

DaTrill is daTroll....onlybshows up when market cracks spewing ridiculousness crap

ALERT.....stop engaging!

[pecunia]

DaTrill is daTroll....onlybshows up when market cracks spewing ridiculousness crap

ALERT.....stop engaging!

Thanks - Pretty cool that his name almost says it.

[Dicey]

DaTrill is daTroll....onlybshows up when market cracks spewing ridiculousness crap

ALERT.....stop engaging!

Thanks - Pretty cool that his name almost says it.

Not that cool at all, IMO.

[swaneesr]

DaTrill is daTroll....onlybshows up when market cracks spewing ridiculousness crap

ALERT.....stop engaging!

Thanks - Pretty cool that his name almost says it.

Not that cool at all, IMO.

+1

Not cool at all if true.


Sent from my iPhone using Tapatalk

[DaTrill]

DaTrill is daTroll....onlybshows up when market cracks spewing ridiculousness crap

ALERT.....stop engaging!

Nope, not a troll.  What is ridiculous?  The blind allegiance to some of the metrics used in early retirement blogs is shocking to me.  The risks people are taking in some of the assumptions is astounding only matched by the resistance to knowledge.  Please read some of Taleb's books and watch his MOOCS as he goes into great detail on models with bad assumptions and the problems they cause.   

[DaTrill]

No fears, just recognizing the realities of the tape.  Meta is the third of the generals to get gapped down 20% in a day (tomorrow), this only happens in bear markets.  I will be much better if the market continues to rip, but recognizing that the stage is set for a grind lower.  Not a gloom and doomer, but 4% has worked well in a bull market.  There are many issues with the same strategy in a bear market for those in the bear market, not for one that is looking back in time.   

No fears?  Not a gloom and doomer?  You might want to check the tape...

Not that I don't have any sympathy for your expectation of tougher times ahead - this is an historic bull market that might be coming to an end - but 1% SWR is akin to saying we are just starting our Japan epoch.  Even if you were from the future and knew that were the case, saying that in advance lumps you in fretful doomers and gloomers.  Just own it.  Also, fill us in on what brilliant moves you are making along the way (I've seen you on the Top Is In thread), not this "in hindsight I did everything right" business.

Don't shoot the messenger.  I'm far far from ever ticking the top or bottom, but posted as I've basically taken $4 mil off the table and explained the NFLX gap down is the "ringing of the bell" for me.  I will be much richer and better off if this is a correction but having experienced several bear markets in many different asset classes, I posted my decision process. 

Roughly long the same equity as near the bottom of March 2020 (didn't track that closely) but also have as much cash as equity as the main reason IMHO for the rip from that point has been the Fed and they appear to be taking away the punchbowl.  This could be a head fake and JP might keep spiking the markets, but inflation is brutal and creeping up.   

That's just the thing though, when exactly did you take $4M 'off the table' and where is is positioned?  I'm well balanced, and I have a journal showing my moves in and out of the market.  You just kinda started posting when the market started to tank.

50% boring index, 50% Cash, some CDs.  Will start rolling CDs again after rates go up above 1%.  Stopped when yields went below 1% (what's the point).  As I stated before, the ringing of the bell for me was NFLX tanking 20% in a day.  Sold that day, until I was roughly 50/50.  Was fully invested before that. 

Started posting about 6 months ago as I was exploring mid-year ACA in different states, but WFH was extended until end of year 2022 (might expand further).  I have no experience with ACA but have a lot of experience with markets and stats.  A forum is only valuable if everyone contributes.  I'll be much richer (still well into the 7 figures) if the market rips but sharing my extensive experience in the markets.  Down 7% YTD, perfectly happy if I only half the market performance in either direction for the near future.  Never short a bear market, cover rallies are vicious.       

[SwordGuy]

50% boring index, 50% Cash, some CDs.  Will start rolling CDs again after rates go up above 1%.  Stopped when yields went below 1% (what's the point).  As I stated before, the ringing of the bell for me was NFLX tanking 20% in a day.  Sold that day, until I was roughly 50/50.  Was fully invested before that. 
 

So, about 50% of your portfolio is losing value to inflation.    You'll make money if you correctly pick the bottom and buy back in, and you'll lose money if you really get it wrong.

I'm not selling my stock anytime soon, so I'm earning dividends which are higher than CD or savings account interest.   I won't make as much money as you would if you get it right and won't lose anything if I guess wrong about the bottom of the market. 

I'm already rich, I'm already retired, so I don't need extra risk.  I just need good enough returns over the long term. 

Here's what market news looks like, all on the same day:

"Yammer, yammer, yammer, which proves the market will go up!"

"Blah, blah, blah, which proves the market will go down!"

Since so very many people whose job it is to know what the market will do are wrong almost all the time, why would I think I could do better?   

The answer is, I don't.

You, apparently, think you can do better.  It will be interesting for the rest of us if you post what you do as you do it (not afterwards).   Then we can see how right you are.

[arcturus]

Well, on a topic other than @DaTrill 's views of the market and retirement rules, I took the step today of updating my spreadsheet with the losses from January --- there is something psychological about that that actually makes me feel better to see the updated numbers in spreadsheet and have the sense that its less money but its the new foundation to start building on again.  Weird how somehow seeing it in pixels on a screen helps in a weird way!

I do have the sense that we're in for kind of a sideways year in 2022 and I'm sure there will be some bumps in the road ahead.  But I am a subscriber to the old adage that "time in the market" is more reliable that "timing the market."

I just find it a strangely healthy exercise and wonder if anyone else has a similar view.  I think many of us agree that 2021 seemed to get a bit ahead of itself by mid-year.

[SwordGuy]

I think it's helpful too.

Not only that, but I've found that back-tracking to when the market reached that valuation is very helpful.

For example, when the market dropped in January, I realized that 6 months earlier I had been celebrating that market index as an all time high.   I mean, if I was breaking out champagne and shouting for joy six months ago, why feel down in the dumps today at the same market valuation?