So, think about what a 97% 40-year success rate means: the absence of all of the above for approximately the next 1,200 years. (A 97% success rate means a 3% failure rate; those 40 years divided by 0.03 is 1,200 years.) Ignore for a minute the uncertainties of the less-developed world and think only about the winners: Germany—in this century alone, three episodes of military and/or economic disaster, the first two associated with mass starvation. Japan—wartime devastation even worse than Germany’s. England—near brushes with disaster in 1812-1814 and in both world wars. And even the United States—repeated banking failures, civil war, and the near-bankruptcy of the Treasury in the 19th century. The near collapse of the capitalist economy in the 1930s. And oh yes, I almost forgot—the entire globe barely missed mass incineration in October 1962.
I'm not quite following his logic on the "97%" bit and a
1,200 year timeframe.
He states that a 97% success rate/3% failure rate is 40 years divided by .03 = 1,200 years.
Actually, a 3% failure rate means that out of 100 periods that are each 40 years long, you completely run out of money before Year 41 in 3 periods out of every 100 periods.
100 sets of 40 year retirements is NOT 1,200 years!
2013-1973 = data set #1
2012-1972 = data set #2
2011-1971 = data set #3
(you get the picture)
So to get 100 data sets of 40 year retirements, you only need to go from the 40 year period ending today, back to the period of 1873-1913...in which case you would have 3 failures out of those 100 of 40 year periods of retirements, given a 97% success rate.
Also, I disagree with his claim that anything more than 80% "success" is meaningless.
The US has had a (somewhat) unique role among developing/first-world nations in the 1900s in terms of political stability and lack of large-scale direct war devastation. Yet, despite this, 20% of the time a portfolio has failed to last 30 years! (if your chosen withdrawal rate has an 80% success). And those 20% failures weren't caused by the POTUS confiscating your assets, or from Mexico carpet bombing 90% of our manufacturing infrastructure or from hyperinflation (i.e. the really crazy shit that happens in the world that no one can predict)
If anything, IMO this should serve as a wakeup call, rather than an excuse to throw caution to the wind.
People have free will to take risks they choose to take, with whatever calculated risk level they are comfortable with at that time. However, remember that even with a 20% 'failure' for an 80% success rate, among those 80% 'successes', there are several where the portfolio was sliding down to a very low level and destined for certain failure with just a few more years. Imagine having one of those "80% successes" that is dwindling down, watching that portfolio drop in your gray and golden years, then looking back at the calendar, then back at the portfolio, then back at the calendar...waiting and wondering which will win the race to hit the bottom first: your portfolio, or your casket being laid in the ground?
Again - everyone must take risks every day with various choices...but I'd rather sleep soundly and endure a few more years of toiling at work for more emotional freedom later, rather than take emotional freedom now, and a 20%-40% chance of far more stress later (not only running out of money, but also the 'successes' that are past the point of no return and WILL fail in just a few more years). Go around to people in their 70s and 80s and 90s today who are in financial difficulties because they started retirement in one of those "20% failure" periods. Ask them how they feel about life's "impossible to predict uncertainties", or the fact that they couldn't have predicted an almost nuclear war in 1962 so they should take comfort in knowing that they can't predict the next war, so that decimated portfolio that's just 10% of what they retired with is simply out of their control and they should just deal with it....before handing them their walker and a lightbulb to go change for your neighbor for $25/hr. ;)
And don't forget - the modern day retirement is mainly a modern day invention. People didn't 'retire' en masse at 50 or 55 or even 60 (much less 35 or 45) back in the 1800s and a good part of the 1900s with a leisurely lifestyle: they often simply worked until they died, or had a handful of years when they were physically unable to work before they died. Having the ability to consider even a 30 year retirement is an historical anomaly for most of society and most of the modern era. (my point being: I don't feel bad wanting to make it a very secure 40 year phase, since I'm tickled pink that I'm fortunate enough to even have this ability. It's not like everyone before me has enjoyed 50 year retirements and my paranoia is pushing me to do just a 30 year retirement)
One last thing - the "success" rates, while taking into account your portfolio returns, says nothing of the standard of living index. Would someone retiring in 1903 with a 4% SWR WANT to have the same inflation-adjusted budget 20 years later in 1923, after things like cars and washing machines and other inventions were rolled out to the masses? Same for someone retiring in 1941 and living till 1981 - was their standard of living and budget merely inflated by inflation, or were there things added to their budgets (healthcare, technology, utilities, mobility of travel, etc.)