Author Topic: Another 4% 'rule is no good' article  (Read 1917 times)

AdrianC

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Another 4% 'rule is no good' article
« on: January 08, 2018, 12:12:11 PM »
Posting just for fun, really.

"Can I Really Retire at 40?" What to Tell Clients
https://www.americanfunds.com/ria/insights/can-i-retire-at-40.html?cid=sm_tw_50306

Your 40-year-old clients may think they can retire now if they invest 25 times their annual spending, which correlates to the commonly cited “4% withdrawal” rule. Our research, though, suggests the needed number is closer to 36 times annual spending. The difference is profound.

Monte Carlo simulation, assuming 4.59% real return from stocks, 1.49% from bonds (reasonable, IMHO). Added a factor for "unexpected spending shocks". This is where I think very early retirees might fall down - it's why we would have failed if I'd have FIRE'd as soon as we hit 25x (failure to control expenditure).

There's a Boglehead's discussion on it too, if you want even more fun.

ysette9

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Another 4% 'rule is no good' article
« Reply #1 on: January 08, 2018, 07:15:03 PM »
Of course you can’t retire on 25x tour expenses if you invest in their funds. If your money is in Vanguard on the other hand, you stand a pretty good chance of making it.

aspiringnomad

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Re: Another 4% 'rule is no good' article
« Reply #2 on: January 08, 2018, 08:32:54 PM »
“It’s easy to discount the early retirement dreams of our 40-year-old — chalk it up to the delusions of youth.”

Nah, we’ll chalk it up to your crazy expense ratios.

WhiteTrashCash

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Re: Another 4% 'rule is no good' article
« Reply #3 on: January 08, 2018, 08:37:17 PM »
Of course you can’t retire on 25x tour expenses if you invest in their funds. If your money is in Vanguard on the other hand, you stand a pretty good chance of making it.

WhiteTrashCash liked this post. +5 reputation

Mighty-Dollar

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Re: Another 4% 'rule is no good' article
« Reply #4 on: January 09, 2018, 12:02:52 AM »
The American Funds:
Pay a 5.75% front end load, then pay an additional 0.6% or so per year in fees for the so-called privilege of owning a fund that closely mirrors a benchmark. No thanks!

Lan Mandragoran

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Re: Another 4% 'rule is no good' article
« Reply #5 on: January 09, 2018, 08:10:35 AM »
Uggg american funds -_-. Very unfortunately, I have to use them for about 20k of my stache, wife's father is a financial planner that started managing my wife's money and couldn't really pull it to my own management (vanguard or betterment), without hurting feelings. I'm sure ill run into exactly this line of thinking when i'm in my late thirties telling him I'm done with my day job :P.

ysette9

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Re: Another 4% 'rule is no good' article
« Reply #6 on: January 09, 2018, 09:58:37 AM »
Of course you can’t retire on 25x tour expenses if you invest in their funds. If your money is in Vanguard on the other hand, you stand a pretty good chance of making it.

WhiteTrashCash liked this post. +5 reputation

Haha. I’ll be sure to notify one of the mods so they can adjust my account accordingly.