Recency bias and 2008/9

[forummm]

I'm not sure how linking to searches for articles saying that certain, well-maintained, 60-100 year old cars are worth a lot now is evidence they are good investments. You have to put a lot of money into making those old cars collectibles, and the car values have not increased as much as simply buying stocks in the same years the cars were produced. Cars are generally depreciating assets. It costs a lot to make them otherwise, and the opportunity cost is greater.

[OldPro]

Forummm, no offense intended but just how much time did you put into research into cars as an investment before posting those comments?

Investing in cars is just like investing in anything else.  First, you have to get to know the market.  That does not mean that anyone who has ever owned a car or thinks they know something about cars is in a position to suggest they have an informed opinion on the matter.

Look at this site:  http://online.wsj.com/public/resources/documents/info-invcar04.html and click on the 'buy' tab.  Look at the % returns some have provided.   

You will see that they don't have to be old, old cars.  You will see that you don't have to put a lot of money into them.  Buying a car for $10k like a 1970 Oldsmobile Vista Cruiser (station wagon) that has increased in value by 102% in 5 years for example. 

You make assumptions about putting money into them in terms of restoring them.  Why?  You don't have to put a dime into restoration and they can still increase in value.  In fact, I personally always advise NOT to buy a 'project car' and restore it.  Those who do, usually buy the wrong car and rarely if ever can get back what they have put into a car.  Let someone else spend the money to restore and then buy it from them for less than they have in it.

Talking about buying a car in the year it came out compared to buying stocks in the same year means what?  Can you go back in time to buy a stock?  Why would you talk about the past in terms of buying cars?  It's about buying a car today just as you buy a stock today.  Buy a share of IBM today and see how much it goes up in 5 years.  Think it will be 102%?

New cars are depreciating assets.  Who is talking about buying new cars?  Yet, you suggest it as a reason to not invest in cars as if all cars were depreciating assets.  You invest in CLASSIC cars, not new cars and if you invest in the right ones, they are not depreciating assets at all.  Nor does it have to cost anything to make them non-depreciating assets.

What's more, I don't advocate investing in cars as a way to make income.  That is also an assumption most people make.  You can do it for that reason but it is not the only possible reason.

I invest in classic cars to DRIVE them for FREE.  In FIRE there are 3 roads we have to look at.  Expenses, income and ROI.  You are assuming the word 'invest' refers only to income and ROI.  It can also refer to expenses.  Buy a new car and sure it will depreciate.  It certainly adds to expenses.  That means you will have to have the income to pay for it.  Drive a classic which even just maintains its value and you drive it for FREE other than buying gasoline and doing some simple maintenanace like changing the oil.  It doesn't add to expenses and you don't need income to pay for it.  It is part of your investment portfolio.  You may even make a profit from it!

You can 'invest' in something that eliminates expenses from your equation.  If you 'invest' in digging a well you can eliminate paying for city water.  That's when something like 'opportunity cost' is worth bringing up.  Could you have made more buying a stock than you will save on paying for water?  Do you just assume you know the answer or do you work out the numbers?

If you want to talk about 'lost opportunity costs' of investing in a classic car, fine go ahead.  But sit down and define how you are investing in the car, to make income or reduce expenses.  Then run the numbers, not just spout off the top of your head.  Classic cars have increased in value an average of 25% in the last 5 years.  How much has your index fund increased in that time?  I'll tell you, VIGAX has returned 15.31% (we won't mention the 10 year return of 9.6% or the 4.8% return since inception).  Seems to me money put in an Index Fund is what was a lost opportunity cost vs. cars.

That's looking at it from the ROI side as an investment.  If I wanted to invest in cars for ROI, I might buy a 1970 Oldsmobile that isn't even drivable and just garage it for 5 years and sell at a 102% profit.  Or just get the average of 25% if I made an 'average' buy.

But as I said, I don't invest in them for that reason although I will take a profit if I get one.  When I look at it from the expense side, I see it this way.  I see driving a car as a necessity for ME.  That being the case, I have to put it on the expense side of the ledger IF it costs me money to do.  I can't eliminate the cost of gasoline or regular maintenance but I CAN eliminate depreciation by buying classic cars IF I can sell down the road for what I paid.  That is not actually that hard to do if you do your homework on classic cars.  If I get it really right and turn a profit I may even be able to eliminate the cost of gasoline and maintenance from the expense side of the ledger.

The other un-said (by you anyway) is that investing in anything is all about today.  Cars may be a good investment today but that doesn't mean I am suggesting they will be tomorrow.  People always want to throw out comments like, 'yeah, but what if the market for them tanks tomorrow'.  Well the market tanks on everything sooner or later, the point is you have to know what you are investing in and know when to buy and when to sell just like anything else.

So I'm happy to discuss cars as an investment forummm but I expect anyone who wants to discuss it to first do their homework and talk based on what they find out, not what they spout off the top of their head.  Spend some time on the Hagerty site and see what you find.  https://www.hagerty.ca/valuationtools/market-trends

Here's the real difference forummm.  Anyone can invest in a fund and hope they make a profit.  Investing in cars however requires the individual to actually spend some time learning about the classic car market.  Most people want easy answers.  If they get told 'here's the easy answer, Vanguard Index Fund', guess what most people do.  But the topic of this thread, the 08/09 recession affect shows just what the easy answer can also get you. 

[BBub]

Thanks for the hot tip.  You think I can buy a 1970 oldsmobile in my IRA?

[EscapeVelocity2020]

Haha.  Don't worry I have never mistaken you for someone who gives a shit.  I'm just glad you finally admitted you're a troll.

Well, we can always call participants trolls, but unless we really provide evidence (of misleading and inflammatory posts), it's a little lame to just call people trolls.  I don't think OldPro is trolling us, I like what he has to say, and I think he participates without expecting much. 

But yeah, you could call him a troll.  And you could call MMM a troll FWIW, since his blog is mostly comprised of 'I dont' give a shit' posts.  I actually like that about them.

[franklin w. dixon]

*types ten million words about how I totes made a billion dolars investing in beanie babies* heh now these Butt Wholes will know I don't care about their opinions!! ha ha! I have the FY money! *revs awaywards in investment 1982 Dodge Aries*

[BBub]

We can disagree escape2020. That's ok.

When oldpro showed up here I thought he seemed like a really interesting guy with a wealth of unique knowledge, perspective and experience to share.  Actually I still think that.  But after seeing him around, his m.o. is to pop into threads and make ridiculous comments, contradictions & what I would definitely consider inflammatory statements which end up derailing the thread. He gets a kick out of it.  I don't just flippantly go around calling ppl trolls.  When someone challenges an idea it should be done with a genuine attempt to learn and/or help others learn.  Maybe I'm wrong about him, but oldpro seems to get off on trying to make others feel stupid, and he exhibits what I consider to be very trollish behavior.

[brooklynguy]

We can disagree escape2020. That's ok.

When oldpro showed up here I thought he seemed like a really interesting guy with a wealth of unique knowledge, perspective and experience to share.  Actually I still think that.  But after seeing him around, his m.o. is to pop into threads and make ridiculous comments, contradictions & what I would definitely consider inflammatory statements which end up derailing the thread. He gets a kick out of it.  I don't just flippantly go around calling ppl trolls.  When someone challenges an idea it should be done with a genuine attempt to learn and/or help others learn.  Maybe I'm wrong about him, but oldpro seems to get off on trying to make others feel stupid, and he exhibits what I consider to be very trollish behavior.

Yup.  His posts are riddled with internal contradictions, which he keeps dancing around and backpedaling behind.  Of all his unique knowledge, perspective and experience, his most impressive skill surely lies in the art of bullshitting.

Take a look at what unfolded in this thread.

First, OldPro derides "theoretical nonsense like 'safe withdrawal rates'", in a continuation of his recurring straw man argument that the use of SWRs in one's retirement planning necessarily means that you believe they impart magical guarantees against failure.

Instead of sitting around planning for the future, we should grab retirement by the balls, in reliance on the strength of our own potent pair.  Worried about risks?  Just brass-plate those balls and you're good to go!

Stop dicking around with silly rules of thumb, and follow my own nonsensical, invariable rules of law instead.

NEVER touch the capital.  Invest SOLELY in income-generating investments.  Like bars and cars.  But not the stock market.

What's that, you say, cars are not income-generating investments?  From which bodily orifice did you pull that statement?

Oh, I see, from my own post -- well, the joke's on you, because when I laid down OldPro's Immutable Rules of Investing, between the lines I inserted a savings clause permitting me to "touch the capital" if I invest in cars for ROI investing.  You see, those Rules apply only to one of the three methods of investing, using my custom-tailored trifurcated definition of the word.

I like to think outside the box, challenge the status quo, think about things differently, keep an open mind.

Of course, no matter how expansively you define the term investing, the stock market is totally and without exception off limits as a valid alternative for any rational investor--no ifs, ands or buts about that.

Keep an open mind, except for when you keep it closed.

Them's rules to live by.

[forummm]

Forummm, no offense intended but just how much time did you put into research into cars as an investment before posting those comments?

Investing in cars is just like investing in anything else.  First, you have to get to know the market.  That does not mean that anyone who has ever owned a car or thinks they know something about cars is in a position to suggest they have an informed opinion on the matter.

Look at this site:  http://online.wsj.com/public/resources/documents/info-invcar04.html and click on the 'buy' tab.  Look at the % returns some have provided.   

You will see that they don't have to be old, old cars.  You will see that you don't have to put a lot of money into them.  Buying a car for $10k like a 1970 Oldsmobile Vista Cruiser (station wagon) that has increased in value by 102% in 5 years for example. 

You make assumptions about putting money into them in terms of restoring them.  Why?  You don't have to put a dime into restoration and they can still increase in value.  In fact, I personally always advise NOT to buy a 'project car' and restore it.  Those who do, usually buy the wrong car and rarely if ever can get back what they have put into a car.  Let someone else spend the money to restore and then buy it from them for less than they have in it.

Talking about buying a car in the year it came out compared to buying stocks in the same year means what?  Can you go back in time to buy a stock?  Why would you talk about the past in terms of buying cars?  It's about buying a car today just as you buy a stock today.  Buy a share of IBM today and see how much it goes up in 5 years.  Think it will be 102%?

New cars are depreciating assets.  Who is talking about buying new cars?  Yet, you suggest it as a reason to not invest in cars as if all cars were depreciating assets.  You invest in CLASSIC cars, not new cars and if you invest in the right ones, they are not depreciating assets at all.  Nor does it have to cost anything to make them non-depreciating assets.

What's more, I don't advocate investing in cars as a way to make income.  That is also an assumption most people make.  You can do it for that reason but it is not the only possible reason.

I invest in classic cars to DRIVE them for FREE.  In FIRE there are 3 roads we have to look at.  Expenses, income and ROI.  You are assuming the word 'invest' refers only to income and ROI.  It can also refer to expenses.  Buy a new car and sure it will depreciate.  It certainly adds to expenses.  That means you will have to have the income to pay for it.  Drive a classic which even just maintains its value and you drive it for FREE other than buying gasoline and doing some simple maintenanace like changing the oil.  It doesn't add to expenses and you don't need income to pay for it.  It is part of your investment portfolio.  You may even make a profit from it!

You can 'invest' in something that eliminates expenses from your equation.  If you 'invest' in digging a well you can eliminate paying for city water.  That's when something like 'opportunity cost' is worth bringing up.  Could you have made more buying a stock than you will save on paying for water?  Do you just assume you know the answer or do you work out the numbers?

If you want to talk about 'lost opportunity costs' of investing in a classic car, fine go ahead.  But sit down and define how you are investing in the car, to make income or reduce expenses.  Then run the numbers, not just spout off the top of your head.  Classic cars have increased in value an average of 25% in the last 5 years.  How much has your index fund increased in that time?  I'll tell you, VIGAX has returned 15.31% (we won't mention the 10 year return of 9.6% or the 4.8% return since inception).  Seems to me money put in an Index Fund is what was a lost opportunity cost vs. cars.

That's looking at it from the ROI side as an investment.  If I wanted to invest in cars for ROI, I might buy a 1970 Oldsmobile that isn't even drivable and just garage it for 5 years and sell at a 102% profit.  Or just get the average of 25% if I made an 'average' buy.

But as I said, I don't invest in them for that reason although I will take a profit if I get one.  When I look at it from the expense side, I see it this way.  I see driving a car as a necessity for ME.  That being the case, I have to put it on the expense side of the ledger IF it costs me money to do.  I can't eliminate the cost of gasoline or regular maintenance but I CAN eliminate depreciation by buying classic cars IF I can sell down the road for what I paid.  That is not actually that hard to do if you do your homework on classic cars.  If I get it really right and turn a profit I may even be able to eliminate the cost of gasoline and maintenance from the expense side of the ledger.

The other un-said (by you anyway) is that investing in anything is all about today.  Cars may be a good investment today but that doesn't mean I am suggesting they will be tomorrow.  People always want to throw out comments like, 'yeah, but what if the market for them tanks tomorrow'.  Well the market tanks on everything sooner or later, the point is you have to know what you are investing in and know when to buy and when to sell just like anything else.

So I'm happy to discuss cars as an investment forummm but I expect anyone who wants to discuss it to first do their homework and talk based on what they find out, not what they spout off the top of their head.  Spend some time on the Hagerty site and see what you find.  https://www.hagerty.ca/valuationtools/market-trends

Here's the real difference forummm.  Anyone can invest in a fund and hope they make a profit.  Investing in cars however requires the individual to actually spend some time learning about the classic car market.  Most people want easy answers.  If they get told 'here's the easy answer, Vanguard Index Fund', guess what most people do.  But the topic of this thread, the 08/09 recession affect shows just what the easy answer can also get you.

That link shows car "values" going up and down by mostly 20% over the past 5 years. There are some outliers that "went up" 100% in the last 5 years. Now it makes more sense that the WSJ would be involved. This is just like individual stock picking, gambling, whatever you want to call it. The link even includes "buy", "sell", and "hold" pages.

So nice way to cherry pick one car from the cherry picked list of cars that "increased in value" by whatever metric. Oh, and then you cherry pick an index fund that didn't do well to compare it too. How about we compare your cherry picked^2 selection vs what I invested in the past 5 years. VTSAX went up 120%. Which still is better than the cherry picked^2 station wagon. And I didn't have to insure it, spend a lot of time deciding which geriatric station wagon with an 8-track to buy, polish it up, dedicate garage space to, etc. I also could have sold it at any time I wanted to, and had an immediate buyer paying a fair market price, and with literally no transaction cost. Somehow I feel that's not possible with the "classic" car market.

[force majeure]

Guys / gals, to bring the conversation back on-topic, here is a quote I like, taken from monevator.com...


"Things have gone so well for so long that we’re in danger of losing touch with the feelings of loss and despair handed out by the market in 2008. It’s starting to feel like it happened to someone else"

[OldPro]

BBub, I'm in total agreement with your comment that, "When someone challenges an idea it should be done with a genuine attempt to learn and/or help others learn."

Now tell me how your comment, "Thanks for the hot tip.  You think I can buy a 1970 oldsmobile in my IRA?", fits into your idea of how an idea should be challenged.  Where in it is the genuine attempt to learn and/or help others learn?  Or was your, "
Thanks for the hot tip.  You think I can buy a 1970 oldsmobile in my IRA?" comment in fact a troll simply intended to be inflammatory?

Tell me where franklin dixon's comment falls or brooklynguys latest comment falls?  The only comment I see that falls within your 'challenge an idea with a genuine attempt to learn and/or help others learn is the response by forummm talking about cherry picking.  I don't agree with him but at least he has apparently actually looked at it and gave it some thought.

All the rest are just flippant remarks, things taken out of context and personal insults.  But hey, I'm the troll, everyone else is genuinely all about learning or helping others learn right.

Sorry force majeure.  I am actually genuinely interested in your initial thoughts and agree with your last quote re 'feel like it happened to someone else.'  How soon they forget and how they cling on to their 'don't worry about it, the 4% SWR will see you through'.  They believe what they want to believe.

My advice is to invest in various alternatives whether it is cars, coins, wine, peer-to-peer, real estate etc., etc.  Stocks and bonds are NOT the only avenues to invest in.  What makes sense to invest in today may make no sense tomorrow or next year or next decade.  Anyone who thinks they can just park money in anything including an index fund, withdraw 4% of the INITIAL capital and have no problems has indeed not learned the lesson of 2008.  But that really shouldn't be any surprise.

[BBub]

My Oldsmobile IRA comment was intentionally troll-like, a satirical summation of your post, in an effort to enlighten newcomers to the folly of some of your ideas and biases.

[Eric]

My advice is to invest in various alternatives whether it is cars, coins, wine, peer-to-peer, real estate etc., etc.  Stocks and bonds are NOT the only avenues to invest in.  What makes sense to invest in today may make no sense tomorrow or next year or next decade.  Anyone who thinks they can just park money in anything including an index fund, withdraw 4% of the INITIAL capital and have no problems has indeed not learned the lesson of 2008.  But that really shouldn't be any surprise.

You should seriously stop talking about this.  Your understanding of the subject is like a 9th grader questioning the biology PhD about evolution because he read a random article countering the idea that his minister forwarded to him.  Your derision of the academic studies of people who have dedicated their lives to this subject doesn't do anything but show your own ignorance. 

For the record, there was no lesson of 2008.  Unless you count continue to stay the course, but that's a lesson for every year.

[OldPro]

!!!

[OldPro]

Eric, here's what I know.

I stopped having to work for a living 26 years ago.  I don't know if you still work or if you are living on your anticipated 4% SWR from index funds or not.

I had $200k in the pot plus a house paid for when I packed it in.  From that $200k, I generated an income and whatever that income is each year is the income I have to live on.  I never withdraw from the capital.  So far, the income has been more than enough and in fact I've grown the capital by leaving what I didn't need for living on, in the pot.   With me so far?

Now this year I figure my income will be around $65K but that includes income from the capital that was also enlarged when my wife retired early.  Nevertheless, the pot I started with has increased regardless of her contribution.  So here I sit, 26 years in, with a decent income, a house paid for, a nice car in the driveway, etc.  What I invested in and derived my income from has varied a great deal over those 26 years.  I've never invested in stocks during those years at all.   

I don't care about 'academic studies' or theories that say you can build a pot and then count on a SWR of 4%.  I live in the real world, not a theoretical world.  I've learned that things change all the time that will affect you in many ways including financially.  When you find me someone who has been living on a 4% SWR for the last 25 years, I'll listen to that person and their experiences.

My way is proven Eric, I'm the proof that it works, for ME.  If you want to tell me something else worked for you for 26 years, be my guest.  First though you need to put in the 26 years.  So I suggest that YOU Eric 'seriously need to stop talking about this.'  You are talking about something YOU do not have experience of.  I'm talking about 26 years that I have lived it.

Your understanding of CHANGE is like a 9th grader who is listening to a second year student (MMM) working on a Bachelor's degree and then telling someone with a Master's (me) that I seriously need to stop talking about the subject being studied.

[PeteD01]

Eric, here's what I know.

I stopped having to work for a living 26 years ago.  I don't know if you still work or if you are living on your anticipated 4% SWR from index funds or not.

I had $200k in the pot plus a house paid for when I packed it in.  From that $200k, I generated an income and whatever that income is each year is the income I have to live on.  I never withdraw from the capital.  So far, the income has been more than enough and in fact I've grown the capital by leaving what I didn't need for living on, in the pot.   With me so far?

Now this year I figure my income will be around $65K but that includes income from the capital that was also enlarged when my wife retired early.  Nevertheless, the pot I started with has increased regardless of her contribution.  So here I sit, 26 years in, with a decent income, a house paid for, a nice car in the driveway, etc.  What I invested in and derived my income from has varied a great deal over those 26 years.  I've never invested in stocks during those years at all.   

I don't care about 'academic studies' or theories that say you can build a pot and then count on a SWR of 4%.  I live in the real world, not a theoretical world.  I've learned that things change all the time that will affect you in many ways including financially.  When you find me someone who has been living on a 4% SWR for the last 25 years, I'll listen to that person and their experiences.

My way is proven Eric, I'm the proof that it works, for ME.  If you want to tell me something else worked for you for 26 years, be my guest.  First though you need to put in the 26 years.  So I suggest that YOU Eric 'seriously need to stop talking about this.'  You are talking about something YOU do not have experience of.  I'm talking about 26 years that I have lived it.

Your understanding of CHANGE is like a 9th grader who is listening to a second year student (MMM) working on a Bachelor's degree and then telling someone with a Master's (me) that I seriously need to stop talking about the subject being studied.

So you retired in 1989 with a 400k stash in today's $$ and a paid off house and never invested in the stock market. Man, I think I would be a little bit on the defensive side too having missed out on the bull of the nineties. Kudos to you for sticking to your guns throughout.

[brooklynguy]

I don't care about 'academic studies' or theories that say you can build a pot and then count on a SWR of 4%.  I live in the real world, not a theoretical world.  I've learned that things change all the time that will affect you in many ways including financially.  When you find me someone who has been living on a 4% SWR for the last 25 years, I'll listen to that person and their experiences.

My way is proven Eric, I'm the proof that it works, for ME.  If you want to tell me something else worked for you for 26 years, be my guest.  First though you need to put in the 26 years.  So I suggest that YOU Eric 'seriously need to stop talking about this.'  You are talking about something YOU do not have experience of.  I'm talking about 26 years that I have lived it.

If you would stop willfully blinding yourself to the SWR research that you keep deriding, you would realize the absurdity of what you are now saying.  The 4% rule of thumb is the opposite of theoretical; it is entirely empirical, derived solely by looking backwards at history to determine what actually worked in the past.  Your beef with the 4% rule up until this point (that is, that people shouldn't rely on it to work in the future) was at least a logically coherent argument, even if, as has been repeatedly pointed out to you, it is a total straw man (because none of us are operating under the blind faith that the 4% rule is an infallible heavenly decree guaranteed to fail-proof our futures, as you keep implying we do).  But now you're arguing that a 4% SWR didn't work in the past?  That's just insane.

Someone who invested $200k in a broad stock market index fund 26 years ago and followed a 4% SWR spending plan would have approximately $1.2 million today.  You don't need to find someone in the flesh to prove that fact for you (though plenty of such people do actually exist), because you can confirm it simply by looking at the historical record.

[iamlindoro]

I don't care about 'academic studies' or theories that say you can build a pot and then count on a SWR of 4%.  I live in the real world, not a theoretical world.  I've learned that things change all the time that will affect you in many ways including financially.  When you find me someone who has been living on a 4% SWR for the last 25 years, I'll listen to that person and their experiences.

My way is proven Eric, I'm the proof that it works, for ME.  If you want to tell me something else worked for you for 26 years, be my guest.  First though you need to put in the 26 years.  So I suggest that YOU Eric 'seriously need to stop talking about this.'  You are talking about something YOU do not have experience of.  I'm talking about 26 years that I have lived it.

I feel like there's a pretty clear contradiction when you refer to the Trinity Study/4% SWR as a "theory," but then want your way to be understood as but one of many possible methods (I presume this is the point of emphatically stating "it works, for ME").  The 4% SWR is literally based on the data.  In 95%+ of cases, for all past years in which you could retire, the 4% SWR prevents the retiree from going broke during their lifetime.  I am not sure I can pin down what the method you're espousing even is, aside from "be flexible."  Numbers are how we make plans, and they allow us to concretely describe problems and solutions.  Nobody argues for the infallibility of the 4% SWR.  We talk about the need for flexibility and a willingness to adapt all the time in its context.  For what it's worth, I don't think anyone has a problem with you having retired your way-- just with the obvious derision you have for a method of planning and strategy that works for us, and for a great many currently retired people.  You can't demand acceptance of your way of thinking on the one hand and scorn alternatives on the other.  It's total cognitive dissonance.

Are none of the rest of us permitted to have opinions or beliefs until we're on equal footing and have retired for 26 years?  Of course, by then for me, you will have been retired about 60 years, and we're likely to have to employ an extremely long distance form of communication to argue about it.

[forummm]

OldPro, if you don't like to invest in the market, what specifically did you invest in that gave you enough money to go on? It may not have performed as well as the $1.2 million you could have had if you bought stocks instead. But we understand you don't have the risk tolerance for stocks. And you're suggesting another approach. Fair enough.

Why don't you provide a case study for the rest of us to learn from? What were your expenditures like, and what were the businesses that you created or invested in (specific examples) that created all this cash that you've lived off of? If it came from pensions, that would be interesting too. What cars did you buy, how much did you spend to fix them up or maintain them, and how much did you save by driving them, and how much did you profit off of them? Etc.

[OldPro]

OK, let me try to give you a serious response to some comments.  Just bear in mind, I'm being serious, not trying to rain on your parade personally.

Brooklyn, you wrote, "Someone who invested $200k in a broad stock market index fund 26 years ago and followed a 4% SWR spending plan would have approximately $1.2 million today."

I'll say it again.  Find me someone who did that.  What I can't seem to communicate to you (and others) is that things CHANGE.  It isn't a question of whether the math says it would have happened, it is a question of what would REALLY have happened with that person.  It is CHANGE that makes a farce out of a plan of any kind.  You cannot look at the past and predict the future.  You can't say the 4% rule would have worked over the past 26 years and IGNORE any changes that could affect the person operating under that rule in the future.  You can start out using the 4% rule but you cannot know if you will stay with it.  I say you won't.  There are too many variables and something will change that changes your plan.   

Let's suppose someone was working under that rule and in 2008, saw their capital drop drastically in value.  Your answer is that they just have to hang in there and all will work out in the end.  Let's even say that is true.  But the question is DID they hang on or did they bail?  There is no question that a lot of people bailed during the recession.  What happened to them?  Where are they now with their plan?

You fail to take human nature and human behaviour into account.  It's a theory until it is proven to apply to an individual in real life.  That also answers your comment iamlindoro.  It's all theory unless you have done it.  Show me who has done it.  The Trinity Study was done in 1998.  That is 17 years ago.  Find me one person who posts in this forum who has followed the 4% rule for 15 years.  Where are they?

If the rule works, why would you need to be flexible?  The rule says draw 4% of the initial amount plus adding for inflation each year and you won't run out of money.  I understand the rule but where in it do you read 'follow the rule except when flexibility is needed'?  So how can you say to me that, " We talk about the need for flexibility and a willingness to adapt all the time in its context."  That's not according to the 'rule'.

Forummm, I have no problem with risk.  I am quite willing to take calculated risks when I invest but I want to calculate the risk myself, not let some third party calculate the risk for me.  I actually see those using the 4% rule as being risk averse.  They believe there is no risk.  That's what the rule tells them, you won't run out of money.  I believe you can run out of money each and every year.

I'll give you some examples of how I have made money and lived for 26 years without working if you want but I don't see the relevance really.  Each year I figure out what to do for the next year.  Actually, you could say each day I figure it out.  It is an ongoing thing.  That's why I say FIRE is a beginning, not an end.  You have to keep figuring out how to maintain your income every year.  What worked this year or last year may not work next year.  How I made money in 1995 is of what use to someone in 2015?  The opportunity I saw and invested in may no longer exist.

[iamlindoro]

You fail to take human nature and human behaviour into account.  It's a theory until it is proven to apply to an individual in real life.  That also answers your comment iamlindoro.  It's all theory unless you have done it.  Show me who has done it.  The Trinity Study was done in 1998.  That is 17 years ago.  Find me one person who posts in this forum who has followed the 4% rule for 15 years.  Where are they?

MMM himself lives on 4% of his original principal per annum and he's coming up on 10 years retired now.

As to your indictment of flexibilty when it's a "rule," I think you're harping on the use of the word "rule" a little too hard.  Much as your tone and general argumentative nature would suggest you believe, we are not a pack of raving idiots.  We know that past performance cannot guarantee future results.  We know what variables can change.  Thus, most of us with two dry brain cells to rub together realize that if the retiree faces conditions that are worse than any point in history, or they simply worry that they might, that they have the flexibility to withdraw less.  This can be accomplished by living more frugally or by building some margin into the goal retirement amount. 

The 4% rule is not, and has never been, an absolute guarantee that 4% is sustainable under any and all conditions.  It is simply an observation that if future returns are no worse than any given retirement-length period in US market history, including the worst periods like the Great Depression, that 95%+ of retirees will die without going broke-- and most of them will die fabulously wealthy.  Because we acknowledge the possibility that future returns could theoretically be worse than the worst of our history, we advocate flexibility.

This is really not that complicated an argument.  I suspect you're not really missing it, and are instead consciously or unconsciously annoyed by people having a plan that doesn't require the scrabbling you seem to have gone through.  It frankly sounds anxiety-inducing and terrible.  I'll take my 4% "rule" with a side order of flexibility, thanks.

[BBub]

Oldpro, do you have difficulty getting along with others in real life?  Seems like you may have taken the term FY money literally, like, once you had enough you just started telling everyone to F off.  I didn't think that was the point, but admittedly I still have much to learn.

[forummm]

I'll give you some examples of how I have made money and lived for 26 years without working if you want but I don't see the relevance really.  Each year I figure out what to do for the next year.  Actually, you could say each day I figure it out.  It is an ongoing thing.  That's why I say FIRE is a beginning, not an end.  You have to keep figuring out how to maintain your income every year.  What worked this year or last year may not work next year.  How I made money in 1995 is of what use to someone in 2015?  The opportunity I saw and invested in may no longer exist.

I'm interested. You keep referring to a different way of investing and making money. It sounds very different than anything people on this forum have been talking about. If you have some new insights that are less risky than stocks, perhaps people could benefit from them. I understand that the old opportunities may not be available anymore, but perhaps the principles still apply.

[Chris22]

I'm a huge car nut, and realize that many cars have appreciated significantly lately, but you can't ignore the MASSIVE carrying costs of insurance, registration, and storage.  Those pretty much eat all the gains unless you happen to have something currently riding a bubble (SWB 911S for instance).

[brooklynguy]

You fail to take human nature and human behaviour into account.  It's a theory until it is proven to apply to an individual in real life.  That also answers your comment iamlindoro.  It's all theory unless you have done it.  Show me who has done it.  The Trinity Study was done in 1998.  That is 17 years ago.  Find me one person who posts in this forum who has followed the 4% rule for 15 years.  Where are they?

If the rule works, why would you need to be flexible?  The rule says draw 4% of the initial amount plus adding for inflation each year and you won't run out of money.  I understand the rule but where in it do you read 'follow the rule except when flexibility is needed'?  So how can you say to me that, " We talk about the need for flexibility and a willingness to adapt all the time in its context."  That's not according to the 'rule'.

In addition to everything lindoro said, the 4% "rule" is based on a 30-year retirement period.  Many of us are planning for much longer retirements.  But you're still missing the point, because the purpose of the "rule" is not to follow its designated spending plan, robotically or otherwise.  As lindoro said, it is simply an observation about historical success rates, a guideline to be used as one tool in your retirement planning.  You're not going to find many people who robotically withdraw an inflation-adjusted 4% year-after-year like an insect following a hard-wired behavior algorithm, because, like you said, we are all human, and circumstances change.  People naturally adapt to changing conditions, tightening their belts or seeking supplemental income when the markets are down.  Unforeseen events crop up, requiring unexpected expenditures.  Life leads us in new directions, changing our initial assumptions.  But, on a net basis, for a disciplined investor, these factors should increase the success of a SWR-based retirement plan, because no one plans to robotically follow a SWR-based withdrawal strategy, and no one is going to ignore reality and continue to draw down their portfolio to zero on the blind faith that the "4% rule" promised them success.

If you want additional real life examples of these concepts implemented in practice, look up Nords (who frequently posts on this board) and Jim Collins, who are both long-standing pillars of the early retirement community who practice the concepts we preach.  You're not going to find too many 20-year+ extremely early retirees, because there simply aren't that many of them publicly writing about their experiences out there, but you can bet there are tons of traditional retirees who have been following "4% rule" principles in the decades since Bengen's original research was published.

Stock market investing may not be for you.  We get that, and that's perfectly fine.  Everyone here recognizes that "there are many roads to Dublin."  But do you really not see the irony (and the hypocrisy) of branding yourself as someone who thinks outside the box, challenging the notion that preconceived solutions are the only solutions, while at the same time categorically rejecting the validity of the path many (or most) of us are choosing (and doing so in a condescending manner to boot)?

[nereo]

Brooklyn, you wrote, "Someone who invested $200k in a broad stock market index fund 26 years ago and followed a 4% SWR spending plan would have approximately $1.2 million today."

I'll say it again.  Find me someone who did that.  [snip]

I'm a bit shocked that you can't just look around and find people who have lived off their savings invested in the market.  Literally millions of people in the US alone do this every single year.  My grandmother is a good example; she and her husband retired at age 55, then she lived until age 92 (37 years) on their investments and SS.  When she died she had accumulated more money than she had when she retired.  My uncle retired ~15 years ago, lives on investments and is doing just dandy.   The overwhelming majority of retired people I speak with are living off some combination of stocks (often in mutual funds through 401(k)s and IRAs), bonds and SS.  The proportions vary from person to person, but the common thread is that most are living off exactly the sort of thing (equities) that you say you cannot rely on.  Perhaps I am not understanding what you are saying here, but I find it preposterous that you cannot find dozens of people you already know who have been happily retired for decades on a portfolio of mostly stocks and bonds.

Your point is about human nature and the unexpected is a very good one, and it's discussed at length all over this forum.  I don't think anyone here is planning on blindly following a 4% WR without every making adjustments.  MMM has used the term "position of strength," and there's constant discussion about side-hustles (extra income), lowering your COL through moving or lifestyle changes (lowering expenses), and learning how to do things yourself (increased self-reliance).  In that way we're agreeing with your assessment that the future is unknown and CHANGE is inevitable.  If anything, I think we are hyper-aware that the future is unknown, particularly since many of us are anticipating 40+ years being FI. 

Perhaps a good way of determining what people do in another "2008" is to see what they did do.  And most people changed very little: Vanguard released a study showing that >90% of their clients made absolutely no changes to their withdrawal or investment strategies in 2008. Finally, I don't understand why you keep thinking this is all somehow 'theoretical'.  This is all known data from the 'real world'.  The only unknown (and currently unknowable) is whether the next 50 years will have market conditions that are somewhat similar to the previous 50, 75, 125 years.

As many have already said, your stories fascinate me.  If anything, they demonstrate that there are many different ways of achieving FI, and show windows to opportunities for others. But your posts in this thread and elsewhere are constantly framing this as if it is the only way, and that market investing is somehow stupid, risky and bound to fail.  I'm glad your way has worked for you, but it certainly isn't the only way, and I believe it isn't the safest way.

This has been an interesting discussion. 

[sky_northern]

Each year I figure out what to do for the next year.  Actually, you could say each day I figure it out.  It is an ongoing thing.  That's why I say FIRE is a beginning, not an end.  You have to keep figuring out how to maintain your income every year.  What worked this year or last year may not work next year. 

This sounds like work, I want to FIRE so I don't have to work. Guess I stick to blindly throwing my money in to the stock market until I have enough to follow 4% rule. I'm lazy like that. Maybe I'll be living in a card board box eating cat food with I'm 80 but I doubt it.

[arebelspy]

MOD NOTE: We've gotten enough off topic and had enough personal insults, that I'm going to go ahead and lock this thread; it no longer seems productive. 

Purposeful trolling is not acceptable; that will be addressed.

If you'd still like to discuss the original topic, please feel free to start a new thread.  Keep in mind the forum rules.  Cheers!  :)