Does The 4% Rule Work In Today’s Markets?

[k9]

kitces work showed that the 30 year returns were not the problem , in every case it was the first 15 years that ruined the entire 30 year time frame .

in fact the 30 year time frames in the most horrible  scenario's were really not bad . but it was the 15 year start that was pathetic .

no matter how good things recovered after the 15 years it was to little to late as to much was spent down .

That's the reason why people like Wade Pfau talk about a rising glide path of equities. In other words, you start retirement with a given amount of bonds (say, 50/50) to protect yourself from an ugly 15-year initial period. Then, you live only on your bonds at the beginning of your retirement, leaving the stocks to grow. If the market went down during the 15 years and then recovered, you're good : you didn't sell stocks when they were cheap. If it went up, cool: you now have more money and less years to live on your portfolio.

That leads you, contrary to the usual recommendations, to have a bigger and bigger stock allocation as you get older. So the overall idea would be to gradually increase your bond allocation as you get closer to retirement, then gradually decrease it once you're retired. Bonds are here mainly to protect your during the critical time when you switch from growing your stash to spending it.

[mathjak107]

that is what we did and i was pretty glad we did it that way having retired back last july .

we cut equity's way down and until we have a substantial up cycle equity levels are lower then i typically would tolerate

[forummm]

that is what we did and i was pretty glad we did it that way having retired back last july .

we cut equity's way down and until we have a substantial up cycle equity levels are lower then i typically would tolerate

This statement is a little ambiguous. I hope you aren't saying that after the market goes up a lot you will switch more into stocks.

[mathjak107]

a rising glide path is  a bit  different then that  . it cuts the odds down upon entering retirement of  having extended periods of loss such as if we had  not just a v shape  recovery like we had . a rising glide path calls for increasing equity's by about 2%  over a 15 year period up to your desired allocation .

it is a controlled rise in allocation that has no bearing on market performance in the shorter term .

early losses can be quite harmful to a portfolio before it has a good run up .even a prolonged modest drop that is extended can effect your outcome  .

so far last year we spent only principal since we were up about 1% . this year we are up about 4.50% so we have still burned excessive principal to date .

a rising glide path holds down early losses, and increases your gain potential  down the road  . remember for many ,  retirement is not as much about growing richer as it is about not growing poorer .

i had the pedal to the metal for decades growing money . now i  invest to meet goal .

[forummm]

it is a controlled rise in allocation that has no bearing on market performance in the shorter term .

Assume you mean the inverse (the market performance as no bearing on the rise in allocation)--i.e. no market timing. If so, great!

[mathjak107]

correct , no market timing

[wotan]

http://arichlife.passionsaving.com/

[Classical_Liberal]

http://arichlife.passionsaving.com/

This is the same recycled market timing/disaster is looming stuff people try to put forth all of the time.  No one denies that shiller PE does have a correlation to 10 year returns & his contribution to long term investing is invaluable.  The problem is no one can predict how or when reversion to mean will happen.  In fact, there is some legitimate debate as to whether or not some underlying fundamentals have changed over the past 140 years which have permanently altered the mean PE10.

PE 10 is helpful to extrapolate expected future returns, but is basically useless in determining asset allocation for the present.  For example, mean PE10 of S& P 500 is 16.7 http://www.multpl.com/shiller-pe/.  Following this logic the market was VERY frothy back in 1993 with a PE10 of 20.3, more than 20 percent above mean.  An investor who acted on that data would have missed out on annualized returns of 9.10 (CAGR) http://www.moneychimp.com/features/market_cagr.htm from 1993 to 2015, the PE 10 only dropped below this level very temporarily during the financial crisis.  So the index was "overvalued" for a 22 year period, all the while producing excellent returns!

Shiller may be right and the market may not always be 100 percent efficient. It probably does have psychological/emotional undercurrents affecting valuation.  The problem is those undercurrents can last for half of an investor's lifetime, or an entire early retirement.  I'll buy and hold, thank you very much.

[Telecaster]

http://arichlife.passionsaving.com/

Good Lord.  Rob Bennett is completely fucking nuts.   If you've ever read another popular early retirement board, Bogleheads, M*, TMF, etc.  chances are pretty good Rob has been kicked off of it.   

Classical_Liberal had it right.  Some of the time stock markets returns will be below average--by definition of the word average.    It is okay to be below average some of the time, because, again by definition, you will be below average some of the time.   Bennett keeps saying times of high valuation predict a crash.  Oh no they don't!  Higher than average valuations predict lower than average returns.  What can you do about it?  Nothing, accept that sometimes your returns will be below average. 

[steveo]

It is okay to be below average some of the time, because, again by definition, you will be below average some of the time.   Bennett keeps saying times of high valuation predict a crash.  Oh no they don't!  Higher than average valuations predict lower than average returns.  What can you do about it?  Nothing, accept that sometimes your returns will be below average.

I like this. I think it's 100% correct as well. You should always think of what your action should be. Typically the action is stick to the plan - i.e. buy if you can and don't sell.

Sure there may be exceptions at times but this is so rare it's not funny. I'm thinking the 2000 tech bubble.

[arebelspy]

http://arichlife.passionsaving.com/

Good Lord.  Rob Bennett is completely fucking nuts.   If you've ever read another popular early retirement board, Bogleheads, M*, TMF, etc.  chances are pretty good Rob has been kicked off of it.   

The hocomania is real!

[lordmetroid]

4% is too conservative in my opinion. The Trinity study assumes you will make a full time retirement and not earn a single penny. A person committed to FIRE is bound to earn some money from their hobbies in some way or another. Maybe a 6-8% withdrawal rate is more appropriate to avoid sitting on a huge amount of cash at the end of your life.

[mathjak107]

the stress testing on a portfolio is always after subracting out additional income ,whether social security , pension ,rental or a job . it is only based on the draw you need from the portfolio portion -period .

the trinity is only telling you what the portfolio portion can safely generate itself . what you get in total is another issue and has nothing to do with whether what you need from the portfolio portion lives or dies  before you do . .

so in my case i subtract off our needs all the other income . what is left is what i need my portfolio to produce . i would then go to firecalc or a good planner and see how drawing that amount from what i have would have stood up to the worst of the past .

the results have zero to do with any other income . that comes off before you stress test things .

no one ever said the 4% draw is a practical fixed amount for life . a good plan has that amount adjusted as time goes on .

many folks use the rule of thumb that if  you are up more than 50% from where you started year one you can increase spending by 10% plus any inflation adjusting you normally do .

every 3 years  repeat the process if you are still 50% above that starting number  . dying with two much money left on the table that could have been enjoyed  would be a shame unless legacy money is your goal .

[Retire-Canada]

. dying with two much money left on the table that could have been enjoyed  would be a shame unless legacy money is your goal .

Spending money just to spend it would be a shame as well. More spending doesn't lead to more enjoyment. I've tried that during the earlier part of my life and within the confines of some pretty modest incomes compared to a lot of folks on this forum hit a point where I was just spending money with limited happiness gains. The converse has been true as well as I reigned in my spending and redirected it towards savings.

I do agree that the typical MMM 4% SWR retiree should have a plan to deal with all the potential excess wealth they end up with. You'd want to get through the first part of your FIRE both to allow for sequence of return risk to play out and for compounding to grow your 'stach to the point of needing to decide what to do with it. I figure that's something to worry about once I have a ton of free time in FIRE.

[mathjak107]

more money may not buy happiness or enjoyment but as i learned in my lifetime it sure buys choices in life . the 4% swr was never ever meant to be a lifetime spending plan . it is only for ball parking day 1 .

there are to many other factors acting on it such as life expectancy and human spending patterns for it to be a real time plan .

[TomTX]

Wade Pfau says: not so well.

http://retirementresearcher.com/4-rule-work-todays-markets/?utm_campaign=Retirement+Researcher+Weekly+Email&utm_source=hs_email&utm_medium=email&utm_content=31552119&_hsenc=p2ANqtz-_24KgH66qKZC9BL6C3aBtYjZTrpQEjVwlkvO1DHzmS4ARdktoFRasQQDCqgfzJt3F0Mk0In5GxkeGbY45L67rrS5cDxA&_hsmi=31552119

This exhibit makes clear that the low interest rate environment creates additional stresses for the 4% rule that were not apparent in Monte Carlo simulations calibrated to historical data with higher bond-yield assumptions than are available today. For a 50/50 asset allocation to stocks and bonds, these simulations indicate that the 4% rule has a 69% chance of success instead of a 94% chance. The 4% rule may work for today’s retirees, but it is far from a sure bet or a “safe” spending strategy.

Wade Pfau always says that. He always does something to significantly handicap the projections. Stupidly high fees. Presume that the future will be 25% worse than history, so take all the historical data and reduce returns by 25% before running the Monte Carlo. Et cetera.

[Retire-Canada]

more money may not buy happiness or enjoyment but as i learned in my lifetime it sure buys choices in life . the 4% swr was never ever meant to be a lifetime spending plan . it is only for ball parking day 1 .

there are to many other factors acting on it such as life expectancy and human spending patterns for it to be a real time plan .

It definitely buys choices. Our society is all about giving us choices in how to burn through our money and be miserable.

For sure I don't see anyone robotically spending 4% [inflation adjusted] each year until they die. My own thought is to spend 3-5% averaging out to 4%.

For the FIREr with a $1M starting portfolio and a plan to take ~$40K/yr if they end up with a $3M portfolio they'll need to figure out what to do with the extra money that has some meaning to them. Spending $120K/yr+ just to burn through it so they don't leave money on the table doesn't make a lot of sense.

[TomTX]

more money may not buy happiness or enjoyment but as i learned in my lifetime it sure buys choices in life . the 4% swr was never ever meant to be a lifetime spending plan . it is only for ball parking day 1 .

there are to many other factors acting on it such as life expectancy and human spending patterns for it to be a real time plan .

It definitely buys choices. Our society is all about giving us choices in how to burn through our money and be miserable.

For sure I don't see anyone robotically spending 4% [inflation adjusted] each year until they die. My own thought is to spend 3-5% averaging out to 4%.

For the FIREr with a $1M starting portfolio and a plan to take ~$40K/yr if they end up with a $3M portfolio they'll need to figure out what to do with the extra money that has some meaning to them. Spending $120K/yr+ just to burn through it so they don't leave money on the table doesn't make a lot of sense.

That would cover the buy-in for the very ritzy retirement place my aunt and uncle moved to.  We stayed a couple of nights (in one of the separate apartments that residents can reserve for guests!) - OMG great restaurants, pools, gyms, rubberized running/walking paths to almost everywhere, huge pond with wildlife, bocce ball, tennis, library, golf cart shuttle service on-call, fountains, art, concerts, etc etc.

Covers the full gamut of care from independent living to full nursing to hospice.

[mathjak107]

more money may not buy happiness or enjoyment but as i learned in my lifetime it sure buys choices in life . the 4% swr was never ever meant to be a lifetime spending plan . it is only for ball parking day 1 .

there are to many other factors acting on it such as life expectancy and human spending patterns for it to be a real time plan .

It definitely buys choices. Our society is all about giving us choices in how to burn through our money and be miserable.

For sure I don't see anyone robotically spending 4% [inflation adjusted] each year until they die. My own thought is to spend 3-5% averaging out to 4%.

For the FIREr with a $1M starting portfolio and a plan to take ~$40K/yr if they end up with a $3M portfolio they'll need to figure out what to do with the extra money that has some meaning to them. Spending $120K/yr+ just to burn through it so they don't leave money on the table doesn't make a lot of sense.

no one ever spends robotically nor should they . the swr stress testing was never meant to be some sort of retirement plan .

[lordmetroid]

more money may not buy happiness or enjoyment but as i learned in my lifetime it sure buys choices in life . the 4% swr was never ever meant to be a lifetime spending plan . it is only for ball parking day 1 .

there are to many other factors acting on it such as life expectancy and human spending patterns for it to be a real time plan .

It definitely buys choices. Our society is all about giving us choices in how to burn through our money and be miserable.

For sure I don't see anyone robotically spending 4% [inflation adjusted] each year until they die. My own thought is to spend 3-5% averaging out to 4%.

For the FIREr with a $1M starting portfolio and a plan to take ~$40K/yr if they end up with a $3M portfolio they'll need to figure out what to do with the extra money that has some meaning to them. Spending $120K/yr+ just to burn through it so they don't leave money on the table doesn't make a lot of sense.

Exactly, doesn't make much sense for a Mustachian. So rather than postponing your FIRE for 25x your yearly expenditure. Perhaps your number should be something like 15x to 20x. Withdrawing money from your stache to cover all expenses exceeding any income from your hobbies.

[Retire-Canada]

Exactly, doesn't make much sense for a Mustachian. So rather than postponing your FIRE for 25x your yearly expenditure. Perhaps your number should be something like 15x to 20x. Withdrawing money from your stache to cover all expenses exceeding any income from your hobbies.

I hope to have ~17x my the low end of my annual expenses by the end of 2017. At that point I'm going to downshift to PT work  and let the 'stach grow on its own while I have a ton more free time to do the things I love. Working 50% FT will cover my expenses and may even allow me to add a small amount to the 'stash each year. The opportunity cost of working FT until I hit 25x is too high in my opinion.

My FIRE is constrained a bit by my GF's need to work FT 10 more years to get her pension. So PT work gives me about all the free time I can use if I'm not able to hit the road without needing to maintain a relationship.

[arebelspy]

For sure I don't see anyone robotically spending 4% [inflation adjusted] each year until they die. My own thought is to spend 3-5% averaging out to 4%.

Sounds quite reasonable (perhaps even overly conservative).

cFIREsim says 4% initial withdrawal with variable spending of 3% floor, 5% ceiling (default other options--75/25, .18% fees) has a 100% success rate historically, with a median ending portfolio almost 50% higher in real dollars than what you started with.  :)

[steveo]

4% is too conservative in my opinion. The Trinity study assumes you will make a full time retirement and not earn a single penny. A person committed to FIRE is bound to earn some money from their hobbies in some way or another. Maybe a 6-8% withdrawal rate is more appropriate to avoid sitting on a huge amount of cash at the end of your life.

I like this idea but I think you need to have some buffers built in. So too much house and you can downsize or social security or a part time job. I don't though care if I end up with too much money. Spending more money to me doesn't equate to more happiness. If I end up with too much the kids can get it. Having too little is a potential problem but so is working too much.

[lordmetroid]

I love this article on the subject and the illustrative graphs:

http://www.forbes.com/sites/greggfisher/2012/12/05/what-portfolio-withdrawal-rate-can-you-live-with/#4302ff006a6d

[TomTX]

4% is too conservative in my opinion. The Trinity study assumes you will make a full time retirement and not earn a single penny. A person committed to FIRE is bound to earn some money from their hobbies in some way or another. Maybe a 6-8% withdrawal rate is more appropriate to avoid sitting on a huge amount of cash at the end of your life.

I like this idea but I think you need to have some buffers built in. So too much house and you can downsize or social security or a part time job. I don't though care if I end up with too much money. Spending more money to me doesn't equate to more happiness. If I end up with too much the kids can get it. Having too little is a potential problem but so is working too much.

Storing value in "too much house" is stupid. Selling/buying houses and moving your living space is very inefficient.  1-2% front-end load, 6-10% back-end load, plus hundreds of hours of your time wasted.

Just set up a HELOC on your reasonable-sized house before retiring. If the market takes a shit in the first 5 years and you can't get a little part-time job or hobby income, tap home equity to live on for a bit until markets recover.

[mathjak107]

the problem is anything increasing your draw rate like loans increases sequence risk at the worst possible times .

drawing out more to pay loans over an extended downturn can be quite harmful .especially if it happens early on before you develop a cushion from a good up cycle in retirement . counting on paying a loan to support you is never a good idea when you have no job .

sequence risk makes all the difference when spending down and increasing draws at a bad time ..

[Retire-Canada]

the problem is anything increasing your draw rate like loans increases sequence risk at the worst possible times .

drawing out more to pay loans over an extended downturn can be quite harmful .especially if it happens early on before you develop a cushion from a good up cycle in retirement . counting on paying a loan to support you is never a good idea when you have no job .

sequence risk makes all the difference when spending down and increasing draws at a bad time ..

He's suggesting using the HELOC instead of taking money out of his investments to mitigate the early sequence of returns risk. If you need $X to live on, but instead can take $X from your HELOC and take only a small amount from your investments say $X x 10% to pay the maintenance costs on the HELOC that is going to let your investments weather a crash more easily and you can pay the HELOC back when your investments have recovered.

[Retire-Canada]

Sounds quite reasonable (perhaps even overly conservative).

cFIREsim says 4% initial withdrawal with variable spending of 3% floor, 5% ceiling (default other options--75/25, .18% fees) has a 100% success rate historically, with a median ending portfolio almost 50% higher in real dollars than what you started with.  :)

I'm currently at 13.5x annual COL in my investment accounts and hope to hit ~15x when I stop working FT. So unlike the simulation you ran ^^^ I'll probably be starting at 5% WR on the variable rate scale and need $$ for ~45yrs as I am likely to want to FIRE before I get to 25x my full annual COL.

Just to keep things simple if I plug a starting WR of $50K/yr into the old cFIREsim [the new version doesn't have the same options] leaving the rest of the inputs at default and with a lower WR of $30K and upper of $50K for 45yr retirement I get 59% success. I haven't added in my Gov't retirement benefits which are not as generous as many of the SS calcs I see on this forum, but will nevertheless improve my success rate.

I do hear you on the issue of being too conservative. It's something that's on my mind a lot and a big part of the reason why I won't work FT past the end of 2017. I suspect if I can get down to a PT situation that's ~50% FT I won't mind working a few more years as the 'stach grows. It also possible there is some level of PT work that I actually prefer to never working again. Hard to say when you've worked fairly solidly for 30yrs. I do know that I am not willing to work FT much longer.

Once I'm PT I'll decompress and start thinking about the next stage in more detail.

[mathjak107]

the question remaining is if he takes the heloc because he needs money where is the money coming from to pay the heloc ?

if you have the cash to pay the heloc you wouldn't need the heloc .  if you have no cash and take the heloc then you have to sell the investments to pay the heloc .

something is not really making a whole lot of sense . it likely sounds better  than it would actually play out . increasing debt to live on   at a bad time is never really a good idea when you have no job .

two years cash and 100% equity's has been the best combo so far . whether you have the pucker factor for it is another story .

historically spending down directly from 100% equity's has always had a very high rate of success even in bad times .the fact that 100% equity's develops a larger cushion in up years cushions the spending down from it in poor years .

[Retire-Canada]

the question remaining is if he takes the heloc because he needs money where is the money coming from to pay the heloc ?

For simplicity I'll use round numbers:

- you need $50K/yr to live on
- you have a $300K HELOC with no balance
- market crashes for 2yrs
- you take $50K/yr from your HELOC to live on and pay just the minimum maintenance amount

That minimum maintenance amount say 10% of the balance can come from your investments or it can come from the HELOC. Let's say it comes from your investments - taking out $5K in year #1 and $10K in year 2 to maintain the HELOC is far less than the $50K you would have taken out each year if you didn't have the HELOC and instead had to take your living expenses out of your investments.

You then pay down the HELOC once your investments have recovered from the crash.

[mathjak107]

2 years cash and 100% equity's would be the best way . to date that has had the highest success rates through thick and thin over the longest periods of time

[Retire-Canada]

2 years cash and 100% equity's would be the best way

Define best? Holding all that cash means that you lose out on the potential returns if a crash does not happen vs. the person who is fully invested and then uses a HELOC as a buffer. It won't take long for them to gain enough advantage over your plan before they are way ahead.

[mathjak107]

the 100% equity's has made up for that  while most bear markets last about 2 years  . in simulations run that had the highest success rate over longer periods of time over the typical 30 year time frames . it is the best balance of trade offs ,except volatility ,which will be very high .

our planeuses 2 years cash held at all times but we don't need to go more than 40-50% equity's to meet our goals . we have less than a 30 year time frame at this point too .

[arebelspy]

2 years cash and 100% equity's would be the best way

Let's be clear on what you're advocating.  Are you saying 25x in equities PLUS two years cash, for 27x savings?  Cause now we're no longer in 4% rule range, that's a 3.7% WR, and one has to work longer to get there.

Or are you saying still 25x (4% rule), but 23x expenses in 100% equities and 2x expenses in cash?

Because obviously the first one will have a better success rate than straight 4%, because you're not comparing apples to apples, you're starting with more money than a 4% rule.  And the second, I'm skeptical is better.

So which of the two are you saying?

EDIT: Running it on cFIREsim as 23x expenses @ 100% equities and 2x expenses in cash (92/8 equities/cash) gives success rate of 93.1% versus the default 75/25 (equities/bonds) giving 95.69%.  So no, doesn't appear to be better, when comparing apples to apples.  Straight 100% equities gives 94.83%.

[mathjak107]

i am just saying from an allocation stand point 100% equity with 2 years spending cash in reserve has given the highest success rates out to 40 years .

[Retire-Canada]

the 100% equity's has made up for that  while most bear markets last about 2 years  . in simulations run that had the highest success rate over longer periods of time over the typical 30 year time frames . it is the best balance of trade offs ,except volatility ,which will be very high

So hold no cash and 100% equities and a HELOC. You'll get better returns than this ^^^ and everything else will look the same. That sounds more best-er. ;)

[mathjak107]

maybe not , depends how long you have to keep paying the heloc plus interest vs how long the down turn lasts .

[arebelspy]

i am just saying from an allocation stand point 100% equity with 2 years spending cash in reserve has given the highest success rates out to 40 years .

No, it doesn't.  See my edit, above.

Though I only ran it for 30 years.

But show your work, please, rather than just stating this as a fact.  What assumptions and inputs are you using for this outcome?

[Retire-Canada]

maybe not , depends how long you have to keep paying the heloc plus interest vs how long the down turn lasts .

Cash is too much of a drag on your portfolio. You can construct some scenarios where you'll come out ahead, but in most cases not holding cash will make you far more successful. The beauty of the HELOC is it costs you nothing unless you actually needed. That large cash positions costs you every single day for your 45yr FIRE.

[TomTX]

the 100% equity's has made up for that  while most bear markets last about 2 years  . in simulations run that had the highest success rate over longer periods of time over the typical 30 year time frames . it is the best balance of trade offs ,except volatility ,which will be very high .

our planeuses 2 years cash held at all times but we don't need to go more than 40-50% equity's to meet our goals . we have less than a 30 year time frame at this point too .

What's the point of holding 2 years cash at all times?

To get any use out of a cash strategy, you have to spend down the cash when your investments crash.

[arebelspy]

Cash is too much of a drag on your portfolio.

This is the conclusion of every retirement study I'm aware of says as well (e.g. "buckets" and such).  Cash helps you feel good, and helps you ride out down markets psychologically, but if you didn't sell (other than when you had to, which sucks but is fine), you come out ahead without sticking a chunk of your portfolio in cash.

Do you have a study, citation anything, mathjak?

[mathjak107]

mentally i find it comforting in my case .

in the case of 100% equity's it tested better than not holding any cash and 100% equity's . get hit up front with the down turn and holding the cash did better than  selling directly from equity's .

i retired 2 years ago , we set a side two years cash  going in to retirement  and so far have spent principal since markets last year and this year so far have not exceeded in returns what we spent . so far i have all our investments intact .

no cash and 100% equity's works well providing you do not get hit before the first up cycle . then it is akin to a trader having a string of losing trades .

[TomTX]

the problem is anything increasing your draw rate like loans increases sequence risk at the worst possible times .

drawing out more to pay loans over an extended downturn can be quite harmful .especially if it happens early on before you develop a cushion from a good up cycle in retirement . counting on paying a loan to support you is never a good idea when you have no job .

sequence risk makes all the difference when spending down and increasing draws at a bad time ..

The whole point of the HEL strategy is to mitigate sequence of returns risk.

Instead of spending down my (stock/bond) investments while their price has temporarily crashed, I am borrowing cash at a low rate, which I can pay back from my investments when they recover.

[arebelspy]

in the case of 100% equity's it tested better than not holding any cash and 100% equity's . get hit up front with the down turn and holding the cash did better than  selling directly from equity's .

Again, not true.

Running it on cFIREsim as 23x expenses @ 100% equities and 2x expenses in cash (92/8 equities/cash) gives success rate of 93.1% ... Straight 100% equities gives 94.83%.

(This edited out the fact that 75/25 was higher than either at 95.69%.)

Small percentages that aren't statistically significant, but when you're claiming one thing, but the data I'm seeing shows something else.

So if you can back that up, great.  Otherwise just repeating it won't convince us.  :)

If you want (slightly) subpar returns for mental comfort, great.  Accept and own that.  But don't try and say that it's more mentally comforting and better results.  It isn't.

[mathjak107]

what cash are you making payments with if you have no cash ?

[Retire-Canada]

what cash are you making payments with if you have no cash ?

I have explained that above.

[Retire-Canada]

mentally i find it comforting in my case .

That's a fair point. If you can't stomach FIREing without a 2yr cash buffer it's reasonable to have one. That doesn't make it better. It just makes it work for you.

no cash and 100% equity's works well providing you do not get hit before the first up cycle . then it is akin to a trader having a string of losing trades .

Holding 2yrs of cash will put you behind a 100% equities portfolio very quickly. If a crash happens right off the bat you might be better off for a short time compared to using a HELOC, but very quickly you fall behind and you'll get further and further behind as years go by.

Holding cash is very expensive.

[arebelspy]

what cash are you making payments with if you have no cash ?

I have explained that above.

Here it was in case you missed it: http://forum.mrmoneymustache.com/investor-alley/does-the-4-rule-work-in-todays-markets/msg1241013/#msg1241013

[mathjak107]

in the case of 100% equity's it tested better than not holding any cash and 100% equity's . get hit up front with the down turn and holding the cash did better than  selling directly from equity's .

Again, not true.

Running it on cFIREsim as 23x expenses @ 100% equities and 2x expenses in cash (92/8 equities/cash) gives success rate of 93.1% ... Straight 100% equities gives 94.83%.

(This edited out the fact that 75/25 was higher than either at 95.69%.)

Small percentages that aren't statistically significant, but when you're claiming one thing, but the data I'm seeing shows something else.

So if you can back that up, great.  Otherwise just repeating it won't convince us.  :)

If you want (slightly) subpar returns for mental comfort, great.  Accept and own that.  But don't try and say that it's more mentally comforting and better results.  It isn't.

 got to rerun the numbers in firecalc

[arebelspy]

firecalc shows 75/25 over 40 years 85.80% success rate at 4%
98% equity 2% cash 87.7% success
100% equity 87.6

I haven't used FIRECalc in years, since the superior cFIREsim came out, but I went ahead and went over there.  How do you even put in a cash allocation?

If I leave everything default, and just change equities to 100%, I get 93.1%, so I don't know where your 87.6 is coming from.

Can you please show your work?  What inputs are you using?  (And why FIRECalc over cFIREsim)?