If you've chosen wrong and the markets move down you can even go back to work at many points, and work till you get yourself above that 50% again.
Can you? "At many points"? That may work when you retire in Dec2021 and the market collapses in Jan2022 and you aren't too old yet, but if you are older and and maybe not in as good health, this might not be a viable option.
Anytime I hear someone lean on the "I'll just return to work" if things go south, I think to myself this isn't a "Safe" withdrawal rate at all. If that is your contingency plan that's fine, but I wish that scenario were off the table when talking about a proper SWR.
To me a "proper" (whatever that means in this context) SWR is just the basic plan for when someone retires. "I look at my life and think I'll want to spend around $40k/y. To get there, I saved $1m, and will thus plan a 4% SWR." That doesn't mean that exact plan needs to account for every contingency. To me, there is no conflict if that person adds, "If my spouse get an illness that costs tens of thousand to treat, I'll probably pick up a part time job", or "if the markets are down 50%, I'll aim to cut expenses by at least 25% and to pick up some work if I can."
To me, the SWR is just the first layer of the plan.
My plan included a small side gig that I don't even really count as income, but that I can likely scale up at least somewhat if needed or wanted, even potentially in a down market. (We are talking thousands of dollars/yr, not tens or hundreds of thousands, but when the markets are down, every dollar not needed to be withdrawn is important.) I also have every reason to believe I'll be getting a large inheritance, but I also don't specifically account for that, other then as an additional safety net. We will have a fat FIRE, so the possibility of cutting expenses or delaying planned activities or purchases is yet another layer of our plan.
That doesn't mean I'm not planning for a 4% SWR. It just means that I'm not so arrogant as to think I know exactly what they future holds, and I've got options to explore if it looks more and more like I might be in that 5% of the studies, or if my expenses increase for some reason. Or if pig fly or swans start showing gray roots.
I also think that "I'll return to work" means so many different things. As I said above, I imagine it being a slight scaling up that brings in a few hundred dollars a month. That kind of job likely won't be too hard to find. Even during a downturn, people need dog sitters. To me, those options also don't sound painful because even though they are generally low pay, they are low stress, low-responsibility, flexible, and likely very part-time. If the *possibility* of giving back 50 days a year at some point in the future is what buys me and my spouse the ability to take back all 365 days tomorrow? Done. I'll take that transaction without hesitation.
But to some people, it seems like "return to work" means going back to the same field for close to the same pay. I'd agree that while sometimes that's possible, it's probably pretty unusual after a couple years away.
But having a low-pay gig of some kind as one potential option, as-needed, and bringing in only enough to cushion things slightly? That seems very realistic.
