Author Topic: 4% rule question (4% of what?)  (Read 7915 times)

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4% rule question (4% of what?)
« on: August 04, 2014, 11:45:37 AM »
Got a question from reading this thread http://forum.mrmoneymustache.com/ask-a-mustachian/is-buy-and-hold-unrealistic/?topicseen about the 4% rule and I didn't want to necro this thread http://forum.mrmoneymustache.com/ask-a-mustachian/4-rule-question/ to ask the question

Did people sell in 2008 and early 2009 because they thought it was a good time to sell?  In many cases they were forced to.

Job loss, unexpected emergencies, retirement portfolio going down to a level that may not be able to provide them with enough income (for those that were retired).  Dividends didn't stay constant - in fact they were slashed quite dramatically - dividends across the S&P 500 index dropped 25% from peak to trough.  If you rely on dividends to live, at what point do you say "I better sell now before the price/dividend drop prevents me from continuing my lifestyle"?  A 10% drop?  20%?

And the answer wasn't "well let me go out and find a part-time job to rebuild my 'stache'" - there were no jobs available when the unemployment rate skyrocketed and mass layoffs were occurring.

I think people radically overestimate their ability to not react to a stock market drop.  The peak to trough drop for the S&P 500 was 57% and took about 18 months - people were buying all the way down and those with 'dry powder' most likely spent it all by S&P at 1000 (down from 1570), with another 34% to go. 

Even Warren Buffett, in his famous NY Times editorial 'Buy American.  I am.' wrote his piece on October 16, 2008 with the S&P at 946.43.  The market proceeded to fall another 30% before finding bottom.

During the Great Depression, the market overall dropped 50% from the peak a little after 12 months.  If you bought down 50% from the high, you proceeded to watch your investments lose another 72% before the market finally bottomed - I don't think anyone has the ability to withstand those losses and simply say 'oh look, I can dollar cost average even cheaper now down 72% from where I bought down 50% from the highs".

It's just food for thought.  I think the article makes a lot of sense, and having seen 2.5 full cycles from trough to peak now (since the early 90s) I can confidently say that only a very tiny % of the population can really do absolutely nothing during brutal bear markets if they have a significant amount of their net worth in equities.  And realistically that tiny % is most likely comprised of those who are so rich that even if their entire equity portfolio went to 0 it wouldn't really matter due to their diversification and level of wealth.

I'm trying to figure out if I had FI'ed at the start of this, how much money would I really need to keep living on say $40,000/year if I kept a 4% swr? assuming I had entered 2008 with $1 million, and that first year took out my 4% for $40,000, and the stock market crashed, do I now only have 4% of $500,000 to draw from for the 2nd year? So I'd be living on $20,000? Or does the 4% rule mean I can keep drawing $40,000 (during the crash) and after 10 years, I would still have my initial $1 million since the stock market recovered? I never really understood this part of the 4% rule since I've seen other sites mentioned 4% draw of the investment on the day you retire would last, but what happens if you retired right before the crash? Also does 4% rule mean I always have to live on $40,000 (adjusted for inflation) even if my investments doubled to $2 million because the next crash would take it back down to $1 million? So I couldn't live off of $80,000 with a $2 million portfolio (even though it would be 4% as well)

Sorry if this was discussed before, I don't remember seeing this discussed and search didn't seem to find anything. The other 4% threads include firecalc links but I just don't understand on what the 4% draw is from, is it the investment of the day you retire like some of the other sources I found or is it of your current investment?

edit: just trying to learn this for the future since I won't be FI for another 13-18 years
edit:and is there a calculator/excel sheet that would figure this? I mean what would your portfolio be if you had $1 million going into the crash, and kept drawing $40,000/year from 2008 up to 2014

edit: here's my own excel but I'm not detailed in it and was just curious about this, I used VTI to measure market (since this is what I would have in portfolio if I had one back then) and kept withdrawing $40,000/year from the portfolio
year         portfolio     market
2008   $1000000  -40%
2009   $560000     +30%
2010   $688000     +10%
2011   $716800     -5%
2012   $640960     +8%
2013   $652237     +20%
2014   $742684    +15%
so even though VTI is back above what it was before crash, If I had kept taking $40,000, I'm still below what I started out with in 2008, so how does the 4% rule work?
« Last Edit: August 04, 2014, 12:07:59 PM by eyem »

matchewed

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Re: 4% rule question (4% of what?)
« Reply #1 on: August 04, 2014, 11:55:38 AM »
The 4% rule is the assumption of your expenses = that 4%. So in theory your withdrawal only increases over time via adding inflation to the equation and it never goes lower. In practice you should withdraw less depending on your particular circumstances. Although there will be scenarios that I can see where someone may not withdraw less after a market crash.

The more nuanced answer will be to understand the assumptions behind the 4% rule by reading up on the Trinity Study which the rule was derived from. Then just apply it to your circumstances and changing it as you need to given your plan, risk tolerance, and (hopefully conservative) projections.

The other 4% threads include firecalc links but I just don't understand on what the 4% draw is from, is it the investment of the day you retire like some of the other sources I found or is it of your current investment?

I'm not sure I understand the question.

PloddingInsight

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Re: 4% rule question (4% of what?)
« Reply #2 on: August 04, 2014, 12:02:40 PM »
In theory 4% is supposed to be low enough that you can ignore the market crashes, rebalance your portfolio, and go on spending like you did before the crash, with a near-100% chance of making it 30 years without running out of money.  (The 4% rule is based on a 30-year retirement.)

However it is based on empirical studies so it only reflects the history of stock market returns, not all possible future scenarios.

sheepstache

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Re: 4% rule question (4% of what?)
« Reply #3 on: August 04, 2014, 12:03:50 PM »
My understanding is it's 4% of the current value of your portfolio the day you withdraw.  So yes, if the market crashes, you'll withdraw less than you did the year before.

Honestly I'm not sure if the study assumes you withdraw annually or monthly or what.  Agree with matchewed that you'd want to familiarize yourself with the Trinity study for your own peace of mind.

(Edited to indicate that I'm completely wrong.)
« Last Edit: August 06, 2014, 02:04:24 AM by sheepstache »

tarheeldan

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Re: 4% rule question (4% of what?)
« Reply #4 on: August 04, 2014, 12:06:18 PM »
The day you retire. The idea is that, based on average stock performance and inflation, you can safely withdraw 4% of your invested assets (valued at the time of retirement) every year and be OK under most scenarios.

The reason all those firecalc scenarios are brought up are because of those scenarios where the market tanks heavily - and the (1-X)% where X=success rate given are all failure scenarios. If you do a firecalc scenario spending $40k/year with a $0.5m portfolio, you'll see that over 30 years the success rate is only 20.2%.

So, if the market tanked it would make sense to switch to 4% of the current investment valuation after the decline and/or add in some part-time work so that selling isn't necessary and you can benefit from the (hopefully) upcoming recovery.

Basically, and this is something that MMM wrote in response to a common criticism of "what if your plan fails"...we won't continue along a path we know is going nowhere. We'll adapt.

EDIT: Saw your edit. You can do the math in Excel easily yourself. I would a) grab the yearly CPI and b)grab the S&P 500 value as of the same date each year. Then calculate the inflation-adjusted rate of return and apply it to your $0.5m, with a a $40k withdrawal each year. No sweat.
« Last Edit: August 04, 2014, 12:09:32 PM by tarheeldan »

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Re: 4% rule question (4% of what?)
« Reply #5 on: August 04, 2014, 12:19:54 PM »
@tarheeldan, I meant my initial portfolio would be $1 million not half a million with the $40,000 draw, I only saw the half because that's what happened during the crash.

I did another excel with 4% of the current portfolio, but even coming from 2008 to 2014, the imaginary portfolio with a draw of 4% of the (at the time value), in 2014 it was still at about $850,000 (better than the $740,000) by drawing $40,000 regardless of crash

But what I'm getting at is that even though stock market is back and above what it was before crash, how come the portfolio is not, regardless of if you had withdrawn 4% of the initial $1 million or 4% of the current portfolio value at the time you withdrew. I used yearly draws to make excel easier

I'm just trying to see if there is a SWR that is tied directly to the stock market performance, IE if the stock market is at X level, crashes and then recovers back to X level, what can I draw that would have my portfolio also be back at where I had it before the crash?

edit: even with no draw downs, the imaginary portfolio from above would be $934481, so even if stock market is back above crash, no portfolio based on stock market is back to it's starting point, is this assumption correct? So in essence, I really would need outside sources of income. Rentals but that may or may not be my thing :S In my case, I would just move overseas to be with family but I don't want to rely on this either since who knows if the low COL there will stay low.
« Last Edit: August 04, 2014, 12:25:43 PM by eyem »

Eric

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Re: 4% rule question (4% of what?)
« Reply #6 on: August 04, 2014, 12:22:53 PM »
I'm trying to figure out if I had FI'ed at the start of this, how much money would I really need to keep living on say $40,000/year if I kept a 4% swr? assuming I had entered 2008 with $1 million, and that first year took out my 4% for $40,000, and the stock market crashed, do I now only have 4% of $500,000 to draw from for the 2nd year? So I'd be living on $20,000?
No, you'd still withdrawal $40K.  It's 4% of the initial amount at the time of FIRE.  Of course, if you lose 50% of that value, you should be a little nervous about continuing to withdrawal $40K without a recovery happening in the next few years.

Note -- you can do it this way and have a 100% chance of never running out of money.  But of course, your spending/expenses could also vary wildly from year to year so you'd need a lot of flexibility.

Or does the 4% rule mean I can keep drawing $40,000 (during the crash) and after 10 years, I would still have my initial $1 million since the stock market recovered?
Of course you could have your initial $1MM after 10 years, but there's no guarantee.  In fact, it's normal for your value to dip below that initial mark for extended periods of time. (depending on market conditions, obviously)

I never really understood this part of the 4% rule since I've seen other sites mentioned 4% draw of the investment on the day you retire would last, but what happens if you retired right before the crash?
And there's the rub.  The 4% rule, taken as a strict no adjustments can be made rule, failed 5% of the time after 30 years.  Those times were do to poor sequencing, like retiring right before a crash.

Also does 4% rule mean I always have to live on $40,000 (adjusted for inflation) even if my investments doubled to $2 million because the next crash would take it back down to $1 million? So I couldn't live off of $80,000 with a $2 million portfolio (even though it would be 4% as well)
In theory, yes, you should continue to live on your inflation adjusted initial withdrawal amount ($40K) even when your portfolio increases in value.  Now realize that 4% is somewhat of a worst case scenario number (it worked 95% of the time), so there are many other time periods where a higher WR would've worked.  The problem is that you don't know until much later.  So at some point, yes, you'll realize that you have a lot more money than needed to support your withdrawals.  But you're talking decades down the road, because of volatility. 

But you should understand where the numbers come from:
Original Trinity Study
Updated through 2009


tarheeldan

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Re: 4% rule question (4% of what?)
« Reply #7 on: August 04, 2014, 12:29:17 PM »
I'm just trying to see if there is a SWR that is tied directly to the stock market performance, IE if the stock market is at X level, crashes and then recovers back to X level, what can I draw that would have my portfolio also be back at where I had it before the crash?

The problem is that, at the time you are deciding how much to withdraw you don't know what's going to happen to the market in the future. So yeah, the safest thing would be to - if it were possible- continually adjust spending to 4% of your current investment valuation.

(Btw I know your 500k = 0.5*1m, I used 500k as the starting point because you were asking, if I lost half my money in the recession, can I withdraw $40k/yr still? And the firecalc shows probably not, in nearly 80% of cases you'd run out of money.)

Anyway so, like your latest edit said - yeah, you'd have to be flexible in a very difficult scenario like this and find additional income and/or cut spending.

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Re: 4% rule question (4% of what?)
« Reply #8 on: August 04, 2014, 12:32:17 PM »
Thanks for all the info, I'll read up on the trinity study, I've looked at it in the past relative to the bits that I was interested it, I just never really understood it completely :S

I think I'm getting the idea that the 4% rule from  Trinity doesn't in fact say the initial portfolio amount is never going to come back to what it started out at and it is okay with it. So if I never make it back up to $1 million, but I could keep drawing $40,000 for 30 years, then I'd be a success by Trinity :S. I'm not entirely sure how I feel about that, if I retired at 45 and had $1 (like the previous 4% thread I linked above said) left at age 75, I'd be a "winner" by trinity study then dead/starving by 76. But MMM had a 4% post on the site that said 4% could be done indefinitely as well, from my understanding of his post anyways http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

Now I really need to reconsider getting other income options :( oh well, at 28, I can get a little head start on this, have to figure out what though since I play with the idea of having rentals but I don't really want them either.

edit: my current crazy scheme is to work in canada from 35 to 45, then collect both US and canada SS, you know, because I like to play with numbers in my free time and see what my options are lol. which is what caused me to play with the idea of having rentals, and then reconsidering it since I found out it wasn't my type of thing at this time in life
« Last Edit: August 04, 2014, 12:35:19 PM by eyem »

matchewed

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Re: 4% rule question (4% of what?)
« Reply #9 on: August 04, 2014, 12:39:00 PM »
@tarheeldan, I meant my initial portfolio would be $1 million not half a million with the $40,000 draw, I only saw the half because that's what happened during the crash.

I did another excel with 4% of the current portfolio, but even coming from 2008 to 2014, the imaginary portfolio with a draw of 4% of the (at the time value), in 2014 it was still at about $850,000 (better than the $740,000) by drawing $40,000 regardless of crash

But what I'm getting at is that even though stock market is back and above what it was before crash, how come the portfolio is not, regardless of if you had withdrawn 4% of the initial $1 million or 4% of the current portfolio value at the time you withdrew. I used yearly draws to make excel easier

I'm just trying to see if there is a SWR that is tied directly to the stock market performance, IE if the stock market is at X level, crashes and then recovers back to X level, what can I draw that would have my portfolio also be back at where I had it before the crash?

edit: even with no draw downs, the imaginary portfolio from above would be $934481, so even if stock market is back above crash, no portfolio based on stock market is back to it's starting point, is this assumption correct? So in essence, I really would need outside sources of income. Rentals but that may or may not be my thing :S In my case, I would just move overseas to be with family but I don't want to rely on this either since who knows if the low COL there will stay low.

Why is it so important to maintain your portfolio's value? If maintaining the portfolio is so important then perhaps using the investment route is a bad route. You may need to look at income streams like you've already noted. Those have their own risks associated with it as well. In the end you just have to get comfortable and knowledgeable of the risks associated with your particular plan.

With an investment flavored FIRE attempt you may or may not be dipping into your portfolio in any given year because the market goes up and down. That is just going to happen. There are some things you can do to mitigate this. Large cash positions that you use to buffer spending during bust years rather than selling while low. But that means you need to have a few years hanging around in cash, admittedly that doesn't need to happen while in the accumulation phase. You can also go to more conservative stock/bond splits to smooth out the dips. They will still be there but it may hurt less. There is a strategy Wade Pfau ran where you increase your bond position when you retire and after a couple of years (2 or so) you start increasing your equity position as you'll need growth and your portfolio survived a critical period.

Many ways to skin the cat. You'll just need to keep a learnin'. Grok the stuff.

Eric

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Re: 4% rule question (4% of what?)
« Reply #10 on: August 04, 2014, 12:44:14 PM »
I think I'm getting the idea that the 4% rule from  Trinity doesn't in fact say the initial portfolio amount is never going to come back to what it started out at and it is okay with it. So if I never make it back up to $1 million, but I could keep drawing $40,000 for 30 years, then I'd be a success by Trinity :S. I'm not entirely sure how I feel about that

The forum's own Dr. Doom wrote a post about this that I thought was pretty eye opening.  It's the 5th post in a series (you should read them all), but the relevant part is his #3 "Living Below the Line is Normal"

Quote
You can see that in an astonishing 60% of cycles, the asset sheet drops 10% or more below the starting total.  In other words, if you are retiring with a million dollars right now, you should go in expecting extended periods of seeing balances lower than 900K; cFIREsim shows us that this outcome is significantly more likely than not.  And further, over 40% of the cycles will have periods where your assets are down over 20%.

http://www.livingafi.com/2014/06/drawdown-part-5-validation/

This is from his cFIREsim numbers, but it should apply universally.  It's almost expected that you should be below your $1MM initial "line", even for extended periods of time, and that's okay.

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Re: 4% rule question (4% of what?)
« Reply #11 on: August 04, 2014, 12:49:22 PM »
I'm concerned about the cash value of the portfolio because that's what I'd be living on, unless I can trade shares of index as payments...
I may keep 5 years of living expense in cash during retirement >.> (so about $125,000). The amount seems large but well, I already keep 1 year in cash as my emergency fund, so what's 4 more?

yeah but living under the initial $1 million line, for how long? does that mean, I should always live on the bare minimum in fear of the next crash? Even with rentals, I'd be in fear of the next fire/tornado/house being blown apart/etc...

well, at least time is somewhat on my side due to age so I'll be planning this for years to come. And at least my job is stable so I'll be able to keep working post FI.

DoubleDown

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Re: 4% rule question (4% of what?)
« Reply #12 on: August 04, 2014, 12:50:10 PM »
^^^^ Yup, good advice from matchewed here.

I think it really is best to focus on income streams, how you will finance your $40,000/year (adjusted upward for inflation, for life) using your assets. The 4% SWR is a nice rule of thumb, to give you an estimated target on how much you will need, but the key is to figure out how to turn your net worth into a reliable source of income for the rest of your life. Lots of ways to skin that cat as mathewed points out: have plenty of cash on hand to weather long, bad markets; buy a lifetime annuity for basic life expenses; draw dividends; own rental real estate; monetize your knowledge or financial strength; part time or seasonal work; sell portfolio assets to meet expense needs and be comfortable with the ups and downs in portfolio value; etc.

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Re: 4% rule question (4% of what?)
« Reply #13 on: August 04, 2014, 12:55:22 PM »
I know I didn't account for dividends, other income streams, I just wanted to get my head wrapped around the 4% concept.
I already have something like an annuity, family bought it for me back in Taiwan as an "insurance". I can draw on it since it's already been paid for and is now just growing with the stock market (only it's in Taiwan and I don't know the tax issues with taking it out while I'm in US). From what I've read, a roth IRA in index funds are better than lifetime annuities over the long haul so I don't plan on buying another one, unless there is something that I haven't heard about which points to them being better.

isn't the 4% rule entirely about "sell portfolio assets to meet expense needs"?

matchewed

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Re: 4% rule question (4% of what?)
« Reply #14 on: August 04, 2014, 12:57:41 PM »
I'm concerned about the cash value of the portfolio because that's what I'd be living on, unless I can trade shares of index as payments...
I may keep 5 years of living expense in cash during retirement >.> (so about $125,000). The amount seems large but well, I already keep 1 year in cash as my emergency fund, so what's 4 more?

yeah but living under the initial $1 million line, for how long? does that mean, I should always live on the bare minimum in fear of the next crash? Even with rentals, I'd be in fear of the next fire/tornado/house being blown apart/etc...

well, at least time is somewhat on my side due to age so I'll be planning this for years to come. And at least my job is stable so I'll be able to keep working post FI.

But there is no portfolio that throws off 4%+inflation on a metronomic annual basis. So your expectations for your cash value of your portfolio do not match up with the reality of how such portfolios behave. You may just need to either change your plan, mitigate these risks, or my personal favorite adjust my expectation (I also use the risk mitigation).

DoubleDown

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Re: 4% rule question (4% of what?)
« Reply #15 on: August 04, 2014, 04:45:11 PM »
yeah but living under the initial $1 million line, for how long? does that mean, I should always live on the bare minimum in fear of the next crash? Even with rentals, I'd be in fear of the next fire/tornado/house being blown apart/etc...

I'm firmly in the camp that if you're having to worry about living on bare minimums, then you aren't ready or haven't thought it through enough how to make it work. It's certainly not worth it to go through your ER life worrying every day whether you'll have enough, or whether you'll be able to make it following the next (inevitable) market crash.

If you create some income streams from your portfolio, you will not have to worry (reasonably) about whether you'll have enough. You'll know that you have enough, barring some kind of outrageous black swan event. And even those can be mitigated to a large degree, particularly through diversification and insurance.

To use your rental house example: You would certainly have insurance on any rental home you owned, which would pay you for all necessary repairs or replacement. With your cash reserves, you'd be fine until you made repairs or found a suitable replacement property. I'm sure you can even get insurance against income loss.

Regarding the annuity, I'm a fan of having a fixed annuity purchased from your savings/portfolio that provides just enough income to cover your minimum living expenses (food, housing, etc.). That way, no matter what market crashes or anything else you encounter, you'll always be assured you will be housed and fed and comfortable. Then, you can invest what's left in your portfolio in a reasonably confident/aggressive manner, knowing that even in a horrible market crash, you'll be fine, and will have the time to recover since your minimum spending needs are met by the annuity, and you don't need to draw down principal in a down market.

Let's use your example of $1 million saved with $40k annual expenses (adjusted for inflation each year). Of that, let's say you could get by on a bare minimum of $20,000/year. That would provide a housing payment, food, medical care and insurance, and a reasonable amount for clothing, transportation, and any other necessities. But nothing else. No travel, no eating out, no partying it up. Let's say you could buy an annuity that would provide that lifetime income for $500k.

After buying the annuity, you have $500k left in your investments. Using the 4% rule, you can have a reasonable allocation between stocks and bonds (say, 60/40) and have a very high likelihood of being able to draw $20k per year from that remaining portfolio to cover your discretionary spending. And you can feel confident "letting it ride" even in market downturns, because you're not going to go hungry no matter what -- the annuity has taken care of that. Of course, odds are that not only will you not go broke on that remaining $500k, more likely you will end up with even more than you started with. But you'll have the flexibility to limit your discretionary spending in down years and increase it if times are good, if you choose.

Prepube

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Re: 4% rule question (4% of what?)
« Reply #16 on: August 04, 2014, 06:15:37 PM »
I'm sure there must be some discussion in this forum's past on the pros and cons of annuities... Any of you old-timers remember anything like that that you can refer us to?  I'm not the best researcher, and didn't find anything when I searched the forums...

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Re: 4% rule question (4% of what?)
« Reply #17 on: August 05, 2014, 06:56:58 AM »
4% is about living on 4% of your investments. It was based on the trinity study and that was about lasting 4 years. But historically it can last a very long time.  The first 5 years into retirement are when returns matter the most. If the market crashes like 2008 within the first 5 years you may need to go back to work or beef up a side hustle if you're just invested in the market.  If you have a 2013 shortly after you retire. Chances are you will die with a lot of money unless u increase your withdrawal rate.  If the market completely falls apart any time after you retire then the world will be in a state of anarchy and it won't matter if you were working or not.

tomsang

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Re: 4% rule question (4% of what?)
« Reply #18 on: August 05, 2014, 07:59:26 AM »
It still seems like there is some confusion about the 4% rule. The trinity study calculated that upon retirement that you could safely remove 4% of your original balance + inflation each years for 30 years. So if the market crashes in year three, you still could remove 4% + inflation over the past three years. So in year three, if you are at 80% of your portfolio you would still have the ability to withdraw at your original amount plus the inflation adjustment.  The reason is that for most scenarios you wil die with a huge portfolio as you could have been withdrawing at 6%++, but you only know that at the end of your life. So 4% is assuming that the market collapses early in your retirement.

With that being said, I think we would also cut expenses, not take an inflation increase, or obtain addition income if the market collapsed 40% in the first year even though the model already takes this into account. Of course, the model is based on the past so in theory it could get worse!

Woodshark

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Re: 4% rule question (4% of what?)
« Reply #19 on: August 05, 2014, 06:42:57 PM »
It still seems like there is some confusion about the 4% rule. The trinity study calculated that upon retirement that you could safely remove 4% of your original balance + inflation each years for 30 years. So if the market crashes in year three, you still could remove 4% + inflation over the past three years.

This is right.  Say at retirement you have 1,000,000.  According to the 4% rule, the first year you can take out $40,000. The next year you can take out $40,000 + the inflation rate. (Say 41,500) Even if the market then tanks 10-30% or whatever, the third year you can take the original 4% plus the inflation for the second year ($41,500) plus inflation again. Say a total of $43,000 for year three. Every year you bump up the prior year by the inflattion rate. No more, no less.  You can do this every year for 30 years. As you do this, your portfolio is gaining in some years but losing in others. The one million (could be) the peak and you are drawing it down every year. If the market goes real, real bad (a 5% chance) then at then end of 29 years you might only have $100,000 left. At 31 you might be at $0.0.  Of course this is the worse case scenario. This method says that IN A WORST CASE SCENARIO a 4% withdrawal (plus inflation) will last 30 years. After that your broke. Once again this is a worse case. 95% of the time you could have draw out more.      But you won't know that until a decade or two down the line.

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Re: 4% rule question (4% of what?)
« Reply #20 on: August 29, 2014, 11:04:29 AM »
I think I'm getting the idea that the 4% rule from  Trinity doesn't in fact say the initial portfolio amount is never going to come back to what it started out at and it is okay with it. So if I never make it back up to $1 million, but I could keep drawing $40,000 for 30 years, then I'd be a success by Trinity :S. I'm not entirely sure how I feel about that

The forum's own Dr. Doom wrote a post about this that I thought was pretty eye opening.  It's the 5th post in a series (you should read them all), but the relevant part is his #3 "Living Below the Line is Normal"

Quote
You can see that in an astonishing 60% of cycles, the asset sheet drops 10% or more below the starting total.  In other words, if you are retiring with a million dollars right now, you should go in expecting extended periods of seeing balances lower than 900K; cFIREsim shows us that this outcome is significantly more likely than not.  And further, over 40% of the cycles will have periods where your assets are down over 20%.

http://www.livingafi.com/2014/06/drawdown-part-5-validation/

This is from his cFIREsim numbers, but it should apply universally.  It's almost expected that you should be below your $1MM initial "line", even for extended periods of time, and that's okay.

Great post.  Don't panic, stay the course, you'll be fine.

All this SWR discussion makes me happy.  This thread is why I visit ER forums.  :D
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