Author Topic: Is 4% Still Realistic?  (Read 9423 times)

oldtoyota

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Is 4% Still Realistic?
« on: July 12, 2016, 08:13:32 AM »
I set my FIRE $ amount goal based on a 4% withdrawal rate. Given the low interest rates in the past decade or so, is 4% still considered realistic to use?


EricL

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Re: Is 4% Still Realistic?
« Reply #1 on: July 12, 2016, 09:44:39 AM »

biglawinvestor

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Re: Is 4% Still Realistic?
« Reply #2 on: July 12, 2016, 10:02:19 AM »
The point of the Trinity Study was to look at every historical 15, 20, 25 and 30 year period to determine the safe withdrawal rate. So the only way the "low interest rates in the past decade or so" impact the validity of the 4% withdrawal rate is if you're able to predict the future. Since you can't, it's the best data we have on safe withdrawal rates!

tonysemail

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2Birds1Stone

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Re: Is 4% Still Realistic?
« Reply #4 on: July 12, 2016, 12:04:04 PM »
Yes

trashmanz

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Re: Is 4% Still Realistic?
« Reply #5 on: July 12, 2016, 03:01:13 PM »
Let me consult the crystal ball.....  Yup the future looks rosy. 

forummm

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Re: Is 4% Still Realistic?
« Reply #6 on: July 12, 2016, 03:17:09 PM »
I'm planning to use a 6% WR (still works most of the time historically). And if the market doesn't work out, be OK with cutting back or getting some fun jobs here and there. So yeah.

dougules

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Re: Is 4% Still Realistic?
« Reply #7 on: July 12, 2016, 03:56:00 PM »
I'm going to be the pessimistic party pooper and say no*.  Right now the CAPE is sitting at 26.78 for the S&P 500.  The Trinity study data only had that level once in its data set.  If you turn those numbers around, the companies that make up the S&P 500 are only making a 3.7% profit for every dollar they're worth at the moment.  Maybe those numbers aren't the whole story or maybe some economic magic will happen.  Maybe I'm just full of excrement.  Maybe I need new balls for my optimism cannon.  I'm just personally a little uncomfortable using a SWR rate that's above what my little chunk of corporate America is actually earning. I still feel completely comfortable a bit over 3% and even more if the CAPE goes back down . 

* 4% will probably work just fine if you think you will likely earn more than $0 post-FIRE or you think you have room to trim if the SHTF.

boarder42

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Re: Is 4% Still Realistic?
« Reply #8 on: July 12, 2016, 05:25:34 PM »
I'm planning to use a 6% WR (still works most of the time historically). And if the market doesn't work out, be OK with cutting back or getting some fun jobs here and there. So yeah.

Are you planning to time it with the shiller ep10 bc most of the time that is successful it is congruent with the shiller pe being low. Planning for a 6% and retiring Jan 1 2008 is a bad idea regardless of how successful it was as a percentage over a large sample of pe ratios.

Metric Mouse

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Re: Is 4% Still Realistic?
« Reply #9 on: July 12, 2016, 11:14:35 PM »
Yes.

ooeei

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Re: Is 4% Still Realistic?
« Reply #10 on: July 13, 2016, 06:25:09 AM »
I don't know, do you think the coming years will be worse than the great depression?  Because it survived that. 

https://www.kitces.com/blog/how-has-the-4-rule-held-up-since-the-tech-bubble-and-the-2008-financial-crisis/

Quote
Yet a deeper look reveals that if a 2008 or even a 2000 retiree had been following the 4% rule since retirement, their portfolios would be no worse off than any of the other “terrible” historical market scenarios that created the 4% rule from retirement years like 1929, 1937, and 1966. To some extent, the portfolio of the modern retiree is buoyed by the (only) modest inflation that has been occurring in recent years, yet even after adjusting for inflation, today’s retirees are not doing any materially worse than other historical bad-market scenarios where the 4% rule worked.

Ultimately, this doesn’t necessarily mean that the coming years won’t turn out to be even worse or that the 4% rule is “sacred”, but it does emphasize just how bad the historical market returns were that created it and just how conservative the 4% rule actually is, and that recent market events like the financial crisis are not an example of the failings of the 4% rule but how robustly it succeeds!

forummm

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Re: Is 4% Still Realistic?
« Reply #11 on: July 13, 2016, 11:39:05 AM »
I'm going to be the pessimistic party pooper and say no*.  Right now the CAPE is sitting at 26.78 for the S&P 500.  The Trinity study data only had that level once in its data set.  If you turn those numbers around, the companies that make up the S&P 500 are only making a 3.7% profit for every dollar they're worth at the moment.  Maybe those numbers aren't the whole story or maybe some economic magic will happen.  Maybe I'm just full of excrement.  Maybe I need new balls for my optimism cannon.  I'm just personally a little uncomfortable using a SWR rate that's above what my little chunk of corporate America is actually earning. I still feel completely comfortable a bit over 3% and even more if the CAPE goes back down . 

* 4% will probably work just fine if you think you will likely earn more than $0 post-FIRE or you think you have room to trim if the SHTF.


There are quite a few analyses (and threads discussing them here on the forum) that lead to the conclusion that CAPE is artificially high right now because of changes in requirements for how companies report earnings. And PE10 includes the 2nd worst economic crisis in 150 years, so it's also skewed higher as a result of that. If you look at just the current PE, and adjust it for the change in earnings reporting, it's much lower (something like 20). Still high historically--but PE has been steadily increasing for the last 70 years, so the historical average keeps growing. And there are many reasons to explain why PE keeps growing that also lead to the likelihood that it will continue to be historically elevated for quite some time, if not forever (the ease of investing in stocks via low cost diversified index funds, the widespread proliferation of retirement savings accounts, increased liquidity, more transparency of information about stocks, etc). The PE does give me some pause and I will proceed with caution.

I'm planning to use a 6% WR (still works most of the time historically). And if the market doesn't work out, be OK with cutting back or getting some fun jobs here and there. So yeah.

Are you planning to time it with the shiller ep10 bc most of the time that is successful it is congruent with the shiller pe being low. Planning for a 6% and retiring Jan 1 2008 is a bad idea regardless of how successful it was as a percentage over a large sample of pe ratios.

I think retiring 1/1/08 with a 6% WR would have worked out fantastically so far. S&P500 was 1400ish? As the market drops you are only spending from your bonds (which have appreciated during the panic). At some point you probably rebalanced from your appreciated bonds into super cheap stocks. Maybe even twice. And then your stock portfolio has tripled from the bottom in '09 (S&P 500 was 700ish). You probably cursed your timing a lot during 08/09. But you still had food to eat.

Specifically to your question, I have run a lot of scenarios on cFIREsim with my full strategy at work (including timing for a future housing change, college, SS, etc). Sometimes I throw in some income in later years (10 years post retirement, never more than 3 years of working, and at 1/2 my current salary). Sometimes I cut the college spending (I paid for my college--I'm OK having my kids do the same, and it might be better for their development if they do so). The years that I typically get failures are 1929, and 1965-70. With both of those, it's pretty clear early on that I'll need to either cut back or go back to work. Keeping a low fixed rate mortgage instead of paying it off early helps with 1965-70 because of the inflation.

I also have a optional spending fund that I subtract from my portfolio. The base budget is more than we spend now, so I'm confident we can live within it. But we probably will want to do optional things like travel. As a fall back I could also raid the fun fund. But I keep it separate for planning because I'd rather have it as an extra and not count on needing it.

And as another level of safety, our base spending is less than 2 full time minimum wage incomes. So getting enough work income shouldn't be too hard. And we already have some optional spending in our current spending, so we could cut back if needed. And in the worst case we'll probably only need 22 years post retirement for me to get SS if I take it early. So there are a lot of levels of safety in the plan.

tonysemail

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Re: Is 4% Still Realistic?
« Reply #12 on: July 13, 2016, 11:54:38 AM »
I think retiring 1/1/08 with a 6% WR would have worked out fantastically so far. S&P500 was 1400ish? As the market drops you are only spending from your bonds (which have appreciated during the panic). At some point you probably rebalanced from your appreciated bonds into super cheap stocks. Maybe even twice. And then your stock portfolio has tripled from the bottom in '09 (S&P 500 was 700ish). You probably cursed your timing a lot during 08/09. But you still had food to eat.

Specifically to your question, I have run a lot of scenarios on cFIREsim with my full strategy at work (including timing for a future housing change, college, SS, etc). Sometimes I throw in some income in later years (10 years post retirement, never more than 3 years of working, and at 1/2 my current salary). Sometimes I cut the college spending (I paid for my college--I'm OK having my kids do the same, and it might be better for their development if they do so). The years that I typically get failures are 1929, and 1965-70. With both of those, it's pretty clear early on that I'll need to either cut back or go back to work. Keeping a low fixed rate mortgage instead of paying it off early helps with 1965-70 because of the inflation.

Would your 2008 strategy have succeeded in 1929 too?
I guess so.  But maybe you ran the numbers?

forummm

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Re: Is 4% Still Realistic?
« Reply #13 on: July 13, 2016, 11:56:22 AM »
I think retiring 1/1/08 with a 6% WR would have worked out fantastically so far. S&P500 was 1400ish? As the market drops you are only spending from your bonds (which have appreciated during the panic). At some point you probably rebalanced from your appreciated bonds into super cheap stocks. Maybe even twice. And then your stock portfolio has tripled from the bottom in '09 (S&P 500 was 700ish). You probably cursed your timing a lot during 08/09. But you still had food to eat.

Specifically to your question, I have run a lot of scenarios on cFIREsim with my full strategy at work (including timing for a future housing change, college, SS, etc). Sometimes I throw in some income in later years (10 years post retirement, never more than 3 years of working, and at 1/2 my current salary). Sometimes I cut the college spending (I paid for my college--I'm OK having my kids do the same, and it might be better for their development if they do so). The years that I typically get failures are 1929, and 1965-70. With both of those, it's pretty clear early on that I'll need to either cut back or go back to work. Keeping a low fixed rate mortgage instead of paying it off early helps with 1965-70 because of the inflation.

Would your 2008 strategy have succeeded in 1929 too?
I guess so.  But maybe you ran the numbers?

Probably not. 1929 had a much slower recovery.

soccerluvof4

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Re: Is 4% Still Realistic?
« Reply #14 on: July 13, 2016, 02:21:03 PM »
Hope so!

fmzip

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Re: Is 4% Still Realistic?
« Reply #15 on: July 14, 2016, 08:52:03 AM »
Here's an interesting read:

https://www.kitces.com/blog/consumption-gap-in-retirement-why-most-retirees-will-never-spend-down-their-portfolio/

I say yes, 4% is realistic over a 30 year period , recent climate of interest rates etc. will ultimately change

oldtoyota

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Re: Is 4% Still Realistic?
« Reply #16 on: August 12, 2016, 08:19:21 PM »
Thanks, everyone!

Spork

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Re: Is 4% Still Realistic?
« Reply #17 on: August 12, 2016, 08:37:09 PM »
Here was my (probably definitely) overly conservative plan:
* Plan on 4% withdrawal
* wait until firecalc/cfiresim give 100% success rate

Here is what I learned:
* spending in FIRE is likely less than 4%
* inheritance happens.  You don't want it to because that means someone important is gone.  But it may change things.
* 100% is ... probably definitely statistically over the top.  It does not really give you a huge amount more potential of success.  Bad things CAN still happen.  The difference between 95% and 100% success is infinitesimally small.... and you still might have a Bad Thing™ occur.
* My actual spending is now < 2%.  And let's be clear here: I am not a badass Mustacian.  I spend more than quite a lot of you. 

For me: Yes.  I think 4% is very realistic.  Over time I have earned well more than 7% (assuming 3% inflation here).  I am currently living on less than dividends/interest.  Will it last until I am 120?  I think so.  The odds are in my favor.  It might not.  But I think odds/statistics indicate it is likely.

undercover

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Re: Is 4% Still Realistic?
« Reply #18 on: August 12, 2016, 11:36:38 PM »
Also keep in mind that just as the best thing in life that you can imagine and build up in your head is never actually that amazing, the worst thing you can possibly imagine is never actually that bad. You can run the numbers, look at statistics, or whatever logical rational means of determining your success rate into the future that you wish to employ - and things can still go wrong.

You can never prepare 100% for what is going to happen into the future, just as you can never 100% know how you're going to react into the future. So, ultimately, the only realistic course of action is to make a plan and stick to it. Almost 100% of the time, your plan will not go exactly how you envisioned it anyway. Hell, maybe the entire damn premise is flawed for you: maybe not working isn't your thing.

mathjak107

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Re: Is 4% Still Realistic?
« Reply #19 on: August 13, 2016, 02:33:34 AM »
it should still hold in the real world .

what the formula's do not consider is life expectancy , human spending patterns  and the fact study after study shows that most retirees do not need yearly inflation adjusting as they hit the older years .

the mere fact that a single male has only a 47% chance of seeing 85 or a couple 74% makes any planning out to 90 or 95 likely not going to happen statistically .

that bumps a 90% success rate up to something like 97% .

throw in the fact as we age we tend not to do and buy a lot of what we did , what we stop spending on covers quite a bit of what we do .

inflation adjusting has been found to be less than every year once you get up there in age  .

we also tend to spend less when things are doing poorly .

we are retired 1 year and worked part time the year before so we were spending down for almost 2 years now .

i never met any retiree who does not use some form of dynamic plan  . no one spends like a robot .

with the markets up to now being so crappy we did not do some of the trips we planned . when burning principal out of the gate day 1 we tend to mentally not be able to burn up anymore  cash on trips .

we actually came in 20k under budget .

we just set maximum goal posts each year using a dynamic method .  we just have to stay within the goal posts but that does not mean we spend that much , we just set boundary's .

« Last Edit: August 13, 2016, 02:41:27 AM by mathjak107 »

NathanDrake

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Re: Is 4% Still Realistic?
« Reply #20 on: August 14, 2016, 11:43:34 AM »
I'd be curious to know if we've ever seen a situation where almost all asset classes are this richly valued. Bonds are expected to return 0% real. Stocks maybe 3-4% real based upon earnings yield.

Given a traditional 60/40 split for most 4% studies, this simply won't hold up in the current environment. That's why I'm a bit more conservative and want to work longer for a 2% SWR.

That being said, international equities appear to have better valuations. If you're a US only investor I'd advise caution.

Roland of Gilead

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Re: Is 4% Still Realistic?
« Reply #21 on: August 14, 2016, 11:59:11 AM »
Just recognize what you are risking by working longer for a 2%SWR.   You are trying to get that 97% success rate up to 100%, not realizing that the far more likely scenario is you are wasting your younger years working on some tiny chance you actually live until 95+.

And really we can never get to 100% since a collapse of government is always a chance and has no way of 100% protection.

4% is fine.  3.5% if you have a really long retirement planned.

NathanDrake

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Re: Is 4% Still Realistic?
« Reply #22 on: August 14, 2016, 12:13:51 PM »
I'm not so concerned about living longer as much as I am that returns will be subpar and I will fall into the "sequence of returns risk" trap of early retirement during my early withdrawal phase.

I'm currently at around a 3.5% withdrawal rate, and getting to 2% will only take a few more years of work.


JLee

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Re: Is 4% Still Realistic?
« Reply #23 on: August 14, 2016, 01:01:20 PM »
I'm not so concerned about living longer as much as I am that returns will be subpar and I will fall into the "sequence of returns risk" trap of early retirement during my early withdrawal phase.

I'm currently at around a 3.5% withdrawal rate, and getting to 2% will only take a few more years of work.

That's up to you.  Trade a few years of your life now for a lower WR later, or trust that you will be able to adapt if future returns are subpar and pick up a side gig/etc to fill in the gap!

Metric Mouse

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Re: Is 4% Still Realistic?
« Reply #24 on: August 14, 2016, 01:21:44 PM »
I'd be curious to know if we've ever seen a situation where almost all asset classes are this richly valued. Bonds are expected to return 0% real. Stocks maybe 3-4% real based upon earnings yield.

Given a traditional 60/40 split for most 4% studies, this simply won't hold up in the current environment. That's why I'm a bit more conservative and want to work longer for a 2% SWR.

That being said, international equities appear to have better valuations. If you're a US only investor I'd advise caution.

Market timing, are we?  Good luck with that.

mathjak107

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Re: Is 4% Still Realistic?
« Reply #25 on: August 14, 2016, 01:46:12 PM »
I'm not so concerned about living longer as much as I am that returns will be subpar and I will fall into the "sequence of returns risk" trap of early retirement during my early withdrawal phase.

I'm currently at around a 3.5% withdrawal rate, and getting to 2% will only take a few more years of work.

That's up to you.  Trade a few years of your life now for a lower WR later, or trust that you will be able to adapt if future returns are subpar and pick up a side gig/etc to fill in the gap!

if you like what you do  i see nothing wrong hanging in there for 2 more years to drop to 2% .  once you are retired many folks stress over the markets in downturns more than they do working .

we are delaying taking ss to 70 just to go from 3.50% to 2% withdrawals . my wife is far more comfortable with much less market dependency

JLee

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Re: Is 4% Still Realistic?
« Reply #26 on: August 14, 2016, 01:53:16 PM »
I'm not so concerned about living longer as much as I am that returns will be subpar and I will fall into the "sequence of returns risk" trap of early retirement during my early withdrawal phase.

I'm currently at around a 3.5% withdrawal rate, and getting to 2% will only take a few more years of work.

That's up to you.  Trade a few years of your life now for a lower WR later, or trust that you will be able to adapt if future returns are subpar and pick up a side gig/etc to fill in the gap!

if you like what you do  i see nothing wrong hanging in there for 2 more years to drop to 2% .  once you are retired many folks stress over the markets in downturns more than they do working .

we are delaying taking ss to 70 just to go from 3.50% to 2% withdrawals . my wife is far more comfortable with much less market dependency

As I said, up to you. :)

forummm

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Re: Is 4% Still Realistic?
« Reply #27 on: August 14, 2016, 02:17:10 PM »
I'm not so concerned about living longer as much as I am that returns will be subpar and I will fall into the "sequence of returns risk" trap of early retirement during my early withdrawal phase.

I'm currently at around a 3.5% withdrawal rate, and getting to 2% will only take a few more years of work.

That's up to you.  Trade a few years of your life now for a lower WR later, or trust that you will be able to adapt if future returns are subpar and pick up a side gig/etc to fill in the gap!

if you like what you do  i see nothing wrong hanging in there for 2 more years to drop to 2% .  once you are retired many folks stress over the markets in downturns more than they do working .

we are delaying taking ss to 70 just to go from 3.50% to 2% withdrawals . my wife is far more comfortable with much less market dependency

If you like your job enough, this may not be much of a sacrifice. It's still likely overkill. I hope you find some good charities to leave the huge pile of money to that you will have after all those years of portfolio growth.

mathjak107

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Re: Is 4% Still Realistic?
« Reply #28 on: August 14, 2016, 02:21:28 PM »
just like when you work , you take raises all along . you don't sit and draw money like a robot . we all adjust as time goes on and we increase our draw rate if we want .

anything better than worse case will have you taking raises .

forummm

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Re: Is 4% Still Realistic?
« Reply #29 on: August 14, 2016, 02:35:53 PM »
just like when you work , you take raises all along . you don't sit and draw money like a robot . we all adjust as time goes on and we increase our draw rate if we want .

anything better than worse case will have you taking raises .

We've both gotten several raises over the past several years. And our spending keeps dropping. And we weren't spending a lot at first either.

mathjak107

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Re: Is 4% Still Realistic?
« Reply #30 on: August 14, 2016, 03:57:34 PM »
the general rule of thumb is every three years look at your balance . if you are still 50% above where you started  your first year then take a 10% additional raise on top of the regular inflation adjusting if dying with to much left is a concern .repeat every 3 years .

forestj

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Re: Is 4% Still Realistic?
« Reply #31 on: August 14, 2016, 06:03:44 PM »
Personally, I'm not counting on it. Gonna quit at about 4% WR, but I'll be ready to jump back into the job market if need be. I kinda expect to have to go back to work at some point, but I'm willing to take that risk. Any WR lower than 4% would simply take way too long for me to attain.

retiringearly

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Re: Is 4% Still Realistic?
« Reply #32 on: August 14, 2016, 06:08:22 PM »
I will not retire until I hit a 3% withdrawal rate.  I am not very far from that.  I am nervous about healthcare continuing to rapidly outpace inflation.

Roland of Gilead

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Re: Is 4% Still Realistic?
« Reply #33 on: August 14, 2016, 06:21:31 PM »
I can always cut our spending down to 3%, 2%, whatever.  It is so cheap living in an RV...last month we spent $150 total on housing, utilities, all while staying at a couple of waterfront camp spots.  Healthcare is the one factor I can't control, but it is fine right now.

mathjak107

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Re: Is 4% Still Realistic?
« Reply #34 on: August 14, 2016, 06:24:18 PM »
healthcare is insane . my wife is on medicare and i am on cobra .

cobra is 6200.00 with no subsidy and 2500.00 in deductables .  still better than the terms of an aca plan .  my wifes medicare and f-plan supplement plus drug coverage is about 5k . we went through 15k in dental this year . none of this includes our ltc premiums .

in fact before our appeal  which we won , we got a 300% increase in medicare premiums from 104.50 to 400 a month because of an asset sale in 2014 before we were retired or on medicare .

if i was on medicare too that increase would have been 600 a month . that is on top of the regular premium rate .

Retire-Canada

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Re: Is 4% Still Realistic?
« Reply #35 on: August 14, 2016, 06:50:05 PM »
I set my FIRE $ amount goal based on a 4% withdrawal rate. Given the low interest rates in the past decade or so, is 4% still considered realistic to use?

4% WR is belt & suspenders plus a spare belt in the closet and some rope in a drawer you could use for a belt. ;)

It's not realistic it's pessimistic and quite doom and gloom.

retiringearly

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Re: Is 4% Still Realistic?
« Reply #36 on: August 14, 2016, 08:45:20 PM »
I set my FIRE $ amount goal based on a 4% withdrawal rate. Given the low interest rates in the past decade or so, is 4% still considered realistic to use?

4% WR is belt & suspenders plus a spare belt in the closet and some rope in a drawer you could use for a belt. ;)

It's not realistic it's pessimistic and quite doom and gloom.
Would you say that if you had to pay for health care?

JLee

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Re: Is 4% Still Realistic?
« Reply #37 on: August 15, 2016, 09:09:25 AM »
I set my FIRE $ amount goal based on a 4% withdrawal rate. Given the low interest rates in the past decade or so, is 4% still considered realistic to use?

4% WR is belt & suspenders plus a spare belt in the closet and some rope in a drawer you could use for a belt. ;)

It's not realistic it's pessimistic and quite doom and gloom.
Would you say that if you had to pay for health care?

If you had to pay for health care it should be factored into your budget, so the 4% rule would still apply.

Roland of Gilead

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Re: Is 4% Still Realistic?
« Reply #38 on: August 15, 2016, 09:56:15 AM »
I think he means if ACA were to somehow get dissolved and you were forced to pay the full high price premiums or heaven forbid they bring back the pre-existing condition clauses and you are forced to pay your hospital bills with no insurance at all.

Pretty unlikely events, especially with the Hill coming into power.   Should mean 4% is safe for at least 8 more years.

JLee

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Re: Is 4% Still Realistic?
« Reply #39 on: August 15, 2016, 09:58:04 AM »
I think he means if ACA were to somehow get dissolved and you were forced to pay the full high price premiums or heaven forbid they bring back the pre-existing condition clauses and you are forced to pay your hospital bills with no insurance at all.

Pretty unlikely events, especially with the Hill coming into power.   Should mean 4% is safe for at least 8 more years.

Meh.  What if there's a massive financial crisis and our money is worthless, what if the government makes all retirement accounts taxable, what if there's another world war...that game could go on forever.  My thought on the whole pile of "what-ifs" -- we're smart people - we'll figure it out if need be.

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Re: Is 4% Still Realistic?
« Reply #40 on: August 15, 2016, 10:06:27 AM »
I think he means if ACA were to somehow get dissolved and you were forced to pay the full high price premiums or heaven forbid they bring back the pre-existing condition clauses and you are forced to pay your hospital bills with no insurance at all.

Pretty unlikely events, especially with the Hill coming into power.   Should mean 4% is safe for at least 8 more years.

Meh.  What if there's a massive financial crisis and our money is worthless, what if the government makes all retirement accounts taxable, what if there's another world war...that game could go on forever.  My thought on the whole pile of "what-ifs" -- we're smart people - we'll figure it out if need be.

My take has always been you have to plan for the current tax laws etc. currently the ACA falls under that to try to plan for what ifs as stated above could go on forever.  at the end of the day we'll likely all be fine.  very few here are retiring 100% bare bones. and planning to make 0 dollars the rest of their life.  giving lots of added flexibility to retirement plans.

FIPurpose

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Re: Is 4% Still Realistic?
« Reply #41 on: August 15, 2016, 11:29:10 AM »
The difference between a 4% and 3.5% WR is about 13%. If a 4% feels too extreme, then find a side gig to cover the difference. For my $45000 budget that comes out to about $5,600 a year or $466/month. Anyone can find side gig jobs to cover $466 a month.

Heck with what I plan to do in retirement, I'll probably still be under that:

Wyzant tutoring or other contract work: ~$50/hr. Retired I could probably do this 3-4 hrs per week ($7-10k a year)
Gardening: Don't currently have time for this, but would reduce my expenses by $1-3k a year.
Fixing more things on my own: $500-$1000 per year.
Moving to a cheaper location: $5-10k

There are so many possibilities, and I think most people on this board will be naturally doing things that lower their expenses/ earn a little side income. Hey with all this ability to radically reduce my expenses in retirement/ still have a fun job here or there, I'll have a ridiculous amount of fun money since my $45k budget already included it.

boarder42

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Re: Is 4% Still Realistic?
« Reply #42 on: August 15, 2016, 11:34:04 AM »
The difference between a 4% and 3.5% WR is about 13%. If a 4% feels too extreme, then find a side gig to cover the difference. For my $45000 budget that comes out to about $5,600 a year or $466/month. Anyone can find side gig jobs to cover $466 a month.

Heck with what I plan to do in retirement, I'll probably still be under that:

Wyzant tutoring or other contract work: ~$50/hr. Retired I could probably do this 3-4 hrs per week ($7-10k a year)
Gardening: Don't currently have time for this, but would reduce my expenses by $1-3k a year.
Fixing more things on my own: $500-$1000 per year.
Moving to a cheaper location: $5-10k

There are so many possibilities, and I think most people on this board will be naturally doing things that lower their expenses/ earn a little side income. Hey with all this ability to radically reduce my expenses in retirement/ still have a fun job here or there, I'll have a ridiculous amount of fun money since my $45k budget already included it.

yep all these things are true i think people get far to caught up in the word retirement.  and what that really means.  for a majority of the population they are nearing the end of being able do any work at all.  if you're quitting in your 30s or 40s you still have lots of ways to earn a buck if push comes to shove.  and the more fun money you have in your budget for traveling etc. the easier those are to cut if something bad were to happen in the markets.

JLee

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Re: Is 4% Still Realistic?
« Reply #43 on: August 15, 2016, 12:09:53 PM »
The difference between a 4% and 3.5% WR is about 13%. If a 4% feels too extreme, then find a side gig to cover the difference. For my $45000 budget that comes out to about $5,600 a year or $466/month. Anyone can find side gig jobs to cover $466 a month.

Heck with what I plan to do in retirement, I'll probably still be under that:

Wyzant tutoring or other contract work: ~$50/hr. Retired I could probably do this 3-4 hrs per week ($7-10k a year)
Gardening: Don't currently have time for this, but would reduce my expenses by $1-3k a year.
Fixing more things on my own: $500-$1000 per year.
Moving to a cheaper location: $5-10k

There are so many possibilities, and I think most people on this board will be naturally doing things that lower their expenses/ earn a little side income. Hey with all this ability to radically reduce my expenses in retirement/ still have a fun job here or there, I'll have a ridiculous amount of fun money since my $45k budget already included it.

yep all these things are true i think people get far to caught up in the word retirement.  and what that really means.  for a majority of the population they are nearing the end of being able do any work at all.  if you're quitting in your 30s or 40s you still have lots of ways to earn a buck if push comes to shove.  and the more fun money you have in your budget for traveling etc. the easier those are to cut if something bad were to happen in the markets.

I would love to quit my permanent job as soon as I hit my barebones FI number, and then pick up more volatile / shorter term / higher pay contracts every now and again for fun/travel/etc money. I don't intend to stop working 100%.

Eric

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Re: Is 4% Still Realistic?
« Reply #44 on: August 15, 2016, 04:27:03 PM »
I think he means if ACA were to somehow get dissolved and you were forced to pay the full high price premiums or heaven forbid they bring back the pre-existing condition clauses and you are forced to pay your hospital bills with no insurance at all.

Pretty unlikely events, especially with the Hill coming into power.   Should mean 4% is safe for at least 8 more years.

Meh.  What if there's a massive financial crisis and our money is worthless, what if the government makes all retirement accounts taxable, what if there's another world war...that game could go on forever.  My thought on the whole pile of "what-ifs" -- we're smart people - we'll figure it out if need be.

Whole-heartedly agree.  The only thing guaranteed is that things will change.  You will adapt. 

Retire-Canada

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Re: Is 4% Still Realistic?
« Reply #45 on: August 15, 2016, 07:35:05 PM »
Would you say that if you had to pay for health care?

Contrary to popular belief health care in Canada is not free. There are some services that are covered, but there are many that are not...ie. dental, glasses, prescription drugs, physiotherapy, in home care, etc... Most emergency services are covered, but we pay for them with our health insurance premiums and taxes so they aren't free either.

Ultimately none of that has anything to do with the 4%WR being crazy conservative - which it is. The 4% WR does not differentiate what costs you've accounted for when you determine your cost of living to then establish the target portfolio value for FIRE.
« Last Edit: August 15, 2016, 07:39:50 PM by Retire-Canada »

NathanDrake

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Re: Is 4% Still Realistic?
« Reply #46 on: August 15, 2016, 07:56:03 PM »
Maybe we're all just arguing semantics.

My FIRE number @ 2% SWR is the minimum I need to get by. I can't cut at that figure. 4% allows me a bit better standard of living, and if I need to cut back, I can.

My current FIRE status @ 4% SWR would not allow me to adjust or cut back during down times.

oldtoyota

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Re: Is 4% Still Realistic?
« Reply #47 on: August 16, 2016, 08:13:33 PM »
The difference between a 4% and 3.5% WR is about 13%. If a 4% feels too extreme, then find a side gig to cover the difference. For my $45000 budget that comes out to about $5,600 a year or $466/month. Anyone can find side gig jobs to cover $466 a month.

Heck with what I plan to do in retirement, I'll probably still be under that:

Wyzant tutoring or other contract work: ~$50/hr. Retired I could probably do this 3-4 hrs per week ($7-10k a year)
Gardening: Don't currently have time for this, but would reduce my expenses by $1-3k a year.
Fixing more things on my own: $500-$1000 per year.
Moving to a cheaper location: $5-10k

There are so many possibilities, and I think most people on this board will be naturally doing things that lower their expenses/ earn a little side income. Hey with all this ability to radically reduce my expenses in retirement/ still have a fun job here or there, I'll have a ridiculous amount of fun money since my $45k budget already included it.

yep all these things are true i think people get far to caught up in the word retirement.  and what that really means.  for a majority of the population they are nearing the end of being able do any work at all.  if you're quitting in your 30s or 40s you still have lots of ways to earn a buck if push comes to shove.  and the more fun money you have in your budget for traveling etc. the easier those are to cut if something bad were to happen in the markets.

I would love to quit my permanent job as soon as I hit my barebones FI number, and then pick up more volatile / shorter term / higher pay contracts every now and again for fun/travel/etc money. I don't intend to stop working 100%.

Me, too. Since I started my own business, I want to keep working. I enjoy it and can do it when I want, so what is not to like? =-)