Author Topic: [MarketWatch] Donít cheat yourself with the 4% rule  (Read 3452 times)

jinga nation

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[MarketWatch] Donít cheat yourself with the 4% rule
« on: June 04, 2018, 12:20:13 PM »
https://www.marketwatch.com/story/dont-cheat-yourself-with-the-4-rule-2018-05-04

Malarkey coming from the WSJ's trade rag with the message "Live a little, spend, baby, spend". Yeah, coz everyone feels rich in an era of overpriced home values and easy credit.

jinga nation

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #1 on: June 04, 2018, 03:56:15 PM »
You're right. I re-read it again, seems more like a pitch to consult a retirement management advisor. Then saw that author's profile shows she's a RMA, albeit fee-only.  Nevertheless, it's a shameless plug disguised as an article. But what isn't these days?

OurTown

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #2 on: June 05, 2018, 10:23:41 AM »
So if my son is a pompous asshole millennial (which he is) and I decide I don't want to leave any money for him when I kick the bucket, I can take 5.5% and cut him out of my will.

Chris22

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #3 on: June 05, 2018, 10:53:37 AM »
The 4% rule is also important for EARLY retirees, because you have (hopefully) a long event horizon to protect against; if you retire at, say, 35, you will likely have another 40+ years you have to support yourself, and absorb market blips, etc.

Versus if you retire at a more normal 60-65, you probably have, what, 20 years to plan for?  Plus your window of opportunity to do cool shit is now a lot smaller.   

alanB

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #4 on: June 05, 2018, 01:50:30 PM »
The 4% rule is also important for EARLY retirees, because you have (hopefully) a long event horizon to protect against; if you retire at, say, 35, you will likely have another 40+ years you have to support yourself, and absorb market blips, etc.

Versus if you retire at a more normal 60-65, you probably have, what, 20 years to plan for?  Plus your window of opportunity to do cool shit is now a lot smaller.

So true, if you are going to die tomorrow you will want to target a 36,525% withdrawal rate just to make absolutely sure you do not run out of money.  I don't know about you but I am going to live to 95 ;P

Chris22

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #5 on: June 05, 2018, 02:20:19 PM »
The 4% rule is also important for EARLY retirees, because you have (hopefully) a long event horizon to protect against; if you retire at, say, 35, you will likely have another 40+ years you have to support yourself, and absorb market blips, etc.

Versus if you retire at a more normal 60-65, you probably have, what, 20 years to plan for?  Plus your window of opportunity to do cool shit is now a lot smaller.

So true, if you are going to die tomorrow you will want to target a 36,525% withdrawal rate just to make absolutely sure you do not run out of money.  I don't know about you but I am going to live to 95 ;P

Seeing the quality of life of many older relatives, I sure as shit hope I don't.  Seems like about 80 is the sweet spot for most people, after that it seems to go down pretty quickly.  My wife has a 96 year old Grandma who is pissed when she wakes up every morning; her husband died 40 years ago and she wants to go join him.

aasdfadsf

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #6 on: June 05, 2018, 06:19:55 PM »
MMM's post on the 4% rule makes the point that it's super-conservative.

http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

If you're an early retiree, you have to think more about major economic fluctuations over the decades, but on the flip side, you are still young and have plenty of earning potential if you need it.

Chris22

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #7 on: June 05, 2018, 07:01:21 PM »
An interesting spin is this...(why I disagree).

Even if you can withdraw more than 4%, do you really want to consume more?

If you dont need any extra, the data suggests that a higher withdraw rate wont make you happier, so why do it?  Wouldnt the security of the lower withdraw rate increase you feeling of a stress free, peaceful financial future?

My wife and I enjoy being frugal and installed our own toilet yesterday even with assets far exceeding a 4% rate.  We enjoy not over spending for dumb stuff.

I think more articles should focus on the money doesnt buy happiness theme.  Currently I am exploring and learning more about the Zen philosophy, and it makes a lot of sense.  Point in fact, the highest scores on happiness surveys/studies come from buddist monks who own only their rice bowls.  Something to ponder as we consider ads tryjng to sell us on beer, diamonds and fast cars as how we get happy.

But it doesnít have to be ďconsumptionĒ.  It could be encouraging people to travel, or to pass some along to their kids earlier, or give it away while alive instead of part of an estate so you can see people enjoy it.

pecunia

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #8 on: June 05, 2018, 07:20:22 PM »
So,....you might have some left over.  So what?  Do you have to eat every carrot in the garden?

I liked the article in that it gave confirmation that if you just carry on a healthy frugal lifestyle, it looks like things will go OK right to the end.

We've had some beautiful Summer days of long sunshine and it has reminded me that the best things in life are free.

Undecided

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #9 on: June 05, 2018, 10:51:38 PM »
An interesting spin is this...(why I disagree).

Even if you can withdraw more than 4%, do you really want to consume more?

If you dont need any extra, the data suggests that a higher withdraw rate wont make you happier, so why do it?  Wouldnt the security of the lower withdraw rate increase you feeling of a stress free, peaceful financial future?

My wife and I enjoy being frugal and installed our own toilet yesterday even with assets far exceeding a 4% rate.  We enjoy not over spending for dumb stuff.

I think more articles should focus on the money doesnt buy happiness theme.  Currently I am exploring and learning more about the Zen philosophy, and it makes a lot of sense.  Point in fact, the highest scores on happiness surveys/studies come from buddist monks who own only their rice bowls.  Something to ponder as we consider ads tryjng to sell us on beer, diamonds and fast cars as how we get happy.

I think people can free themselves from an unrealistic belief about moneyís relationship to happiness, but some research does suggest that (generally) people are happier with more money up to a point well beyond median income (e.g., US$105,000/year for North Americans, although I have to wonder whether thatís in a MCOL setting within NA). Of course thatís not true for every individual (similarly, I wonder whether individuals who avoid the negatives of higher incomes, and combine that with earlier retirement at a sustained level of spending, are even happier), but for the vast majority of people, a 4% withdrawal rate isnít going to put them past the point where more money tends to produce more happiness (because relatively few people save up $2.6 million).

http://time.com/money/5157625/ideal-income-study/

talltexan

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Re: [MarketWatch] Donít cheat yourself with the 4% rule
« Reply #10 on: June 06, 2018, 08:06:08 AM »
Indeed, my parents are in the irrational cautious and not retiring phase. Income was $230,000 last year, age 71 and 66, and a lifestyle that is maybe only about $8,000 of monthly expenses. My dad is still not drawing on his SS.

I would like them to get to do things like travel and visit us more, but my mom keeps working insane hours with an insane commute.