I think one easy way to overcome the fear is to remove the source of the fear: namely, the volatility/risk of markets in our retirement planning. Just before I ER (planned within the next year), I will move a large portion of my investments into "safe" assets, at least for the earlier years of retirement. Large market swings won't matter, my portfolio won't be decimated in the first few years.
All the naysayers will naysay, "But inflation will kill you in the long run!" Yes, it COULD in the long run, if you were dumb. But you are not dumb. And I will gladly accept the long-term risk of inflation to eliminate the short-term risk of having my portfolio destroyed early. And I will be flexible and pay attention to inflation, and moderate my investing/spending/withdrawal accordingly. In later years, we can be more aggressive in investing and withdrawing, when the time horizon for living off the stash is shorter, and when taking out principal won't be scary.
Here's an example, using a $1MM stash for ease of use, a very early (i.e., long) retirement, and a very negative/conservative outlook (and you still win):
- In 2013, you're 35, and have a $1MM stash. You ER.
- You put 80% of your stash in "safe" investments getting only a 4% real rate of return. The other 20% is in growth assets, hoping for a 8-10% real rate of return.
- Over the next 20 years, you are more or less following a 4% SWR (maybe juggling things a bit during down years, reinvesting extra gains during good years, or working a part time gig since you're still young)
- On average, you will not have touched your principal, and the likelihood of this is extremely high (maybe even guaranteed), because you are in super-safe assets for the bulk of your stash. And you're flexible in your lifestyle. Your smaller investment (20% of stash) in growth assets might have even increased your overall stash, plus part time work, plus NOT increasing spending with inflation to the extent you can (like Arebelspy said above, you don't keep increasing your withdrawal no matter what the market is doing)
- On average, inflation could have have eaten away a fair amount of your purchasing power. 20 years later, at 2% inflation, your $1MM stash may now only be worth $670,000 (in 2013 dollars)
- But who gives a F***? Now you're 55, and you can be much more confident about starting to withdraw principal in those down years, if needed. You probably only have 30 years to live
- Another 10 years passes -- you are 65. Maybe to keep up your purchasing power, you had to eat your stash down to $800k (worth only $500k in 2013 dollars). Wow, you used up $200k of your stash living pretty high on the hog! Plus you probably get SS now
- Who gives a F*** your stash is worth less? Start going into that principal with more abandon if you must, you only have another 20 - 25 years to live, if you're lucky! Spend the SS, keep being flexible, and "only" $500k in 2013 dollars will still get you a long way