People will argue all day long about the “correct“ maximum withdrawal rate for somebody 50 years of age and in retirement. I lean toward the conservative approach. If your annual spending is 3.5% of your total invested assets (not your house) it seems to me you’re in good shape.
I still never quite understand this. If you had $400,000 in bonds paying 4%, which would be $16,000 and you rented a house for $1600 a month, would you count the $400,000 as part of your invested assets or would you count it as your house money and leave it out of the equation?
If the former, what happens if you purchase the house you are renting for $400,000?
It just seems very volatile what your numbers would be as you swap back and forth from renting or owning.
In the first case, you'd count $19,200 in rent ($1,600*12) as part of your annual expenses and $400,000 as part of your total invested assets.
If you bought the house your annual expenses would go down by most-of-$19,200-except-property-tax-and-maintence and your total invested assets goes down by $400,000.
The weird case where the 4% rule (or 3.5% if you're Ron Scott) is when you're 20-odd years into a 30 year mortgage and, with a relatively small decrease in your total invested net assets you can decrease your annual expenses substantially, or alternatively with a cash out refinance to a new 30 year term you can increase your total invested net assets without changing your annual expenses.
For a mortgage that has been running for a lot of years already, the annual expenses to non-house assets ratio is probably misleadingly conservative in its predictions of retirement success rates.
