Author Topic: Stop worrying about the 4% rule  (Read 1055555 times)

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #2000 on: October 16, 2021, 01:08:33 PM »
FS is on my Do Opposite List just like George Costanza. Whatever he says turn it around and you'll have a good game plan.


nereo

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Re: Stop worrying about the 4% rule
« Reply #2002 on: October 16, 2021, 03:05:06 PM »
Has this been discussed: https://www.financialsamurai.com/proper-safe-withdrawal-rate/

Personally I disregarded most of it - but I am interested in whether others share the same view that 4% is no longer relevant in the low bond yield environment ?

In his search for clicks Sam crossed over to the disreputable side. His later posts are filled with wild and intentional inaccuracies, all seemingly contrived to push some kick-bait article.

Too bad - at one point he was worth reading.

boarder42

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Re: Stop worrying about the 4% rule
« Reply #2003 on: October 16, 2021, 03:23:40 PM »
Won't even click the link because Sam can eat a big ol' bag of d!cks.

Agreed

Malcat

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Re: Stop worrying about the 4% rule
« Reply #2004 on: October 16, 2021, 03:43:25 PM »
Has this been discussed: https://www.financialsamurai.com/proper-safe-withdrawal-rate/

Personally I disregarded most of it - but I am interested in whether others share the same view that 4% is no longer relevant in the low bond yield environment ?

Yeah, it's probably been discussed, we used to discuss FS articles until we all basically agreed to stop feeding the troll.

Many members here won't click SF links because he's lost that much credibility.

ixtap

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Re: Stop worrying about the 4% rule
« Reply #2005 on: October 16, 2021, 04:22:43 PM »
Just from the title it looks like a reprint of what was originally a guest blog. If that is the case, the original host pulled it because there was so much shoddy logic involved.

DadJokes

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Re: Stop worrying about the 4% rule
« Reply #2006 on: October 18, 2021, 09:34:56 AM »
Has this been discussed: click-bait

Personally I disregarded most of it - but I am interested in whether others share the same view that 4% is no longer relevant in the low bond yield environment ?

Nothing from Financial Samurai should ever be discussed, other than to mock. However, it's probably best not to give him clicks at all, as it just encourages him.

Jamese20

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Re: Stop worrying about the 4% rule
« Reply #2007 on: November 02, 2021, 01:05:45 PM »


But in reality he started a blog for fun and it got to a point where it was making in two years what he (and spouse) retired on to begin with.   Some of which he spends, some of which is donated, some is invested in other stuff (commercial buildings, homes). It all comes back to the blog (and forum), without that he wouldn't have the other stuff.   The funny thing is the blog was only good for the first 5ish years, after that it was all garbage
[/quote]


I find this part of MMM totally dishonest. He talks about how he just casually tapped away at this blog thing for "friends" and then all of a sudden it just happened to blow up and now creates a fortune by accident almost. This is total dishonesty - anyone who has attempted to create a blog knows how much time and effort it takes to create a blog that doesnt succeed let alone a one this successful. When I find such things like this it pretty much puts the whole value of the blog into question for alot of people who are making such life altering decisions

SwordGuy

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Re: Stop worrying about the 4% rule
« Reply #2008 on: November 02, 2021, 01:33:31 PM »

Quote
But in reality he started a blog for fun and it got to a point where it was making in two years what he (and spouse) retired on to begin with.   Some of which he spends, some of which is donated, some is invested in other stuff (commercial buildings, homes). It all comes back to the blog (and forum), without that he wouldn't have the other stuff.   The funny thing is the blog was only good for the first 5ish years, after that it was all garbage


I find this part of MMM totally dishonest. He talks about how he just casually tapped away at this blog thing for "friends" and then all of a sudden it just happened to blow up and now creates a fortune by accident almost. This is total dishonesty - anyone who has attempted to create a blog knows how much time and effort it takes to create a blog that doesnt succeed let alone a one this successful. When I find such things like this it pretty much puts the whole value of the blog into question for alot of people who are making such life altering decisions

For some people, writing is slow and hard.  For some it's fast and easy.    MMM writes like he's explaining stuff over a few beers and adding in some over-the-top sarcasm for fun as he does it.

I've written a whole lot of technical articles and quite a few of them were written pretty quickly, as in an evening with a few hours a couple of days later for editing.   Others were real slogs.   Assuming you have solid writing skills, it just depends on what you're writing, whether you find "the right way" to present the material right off the bat, how well you know the material, how much research you have to do or how much supporting material you have to produce.

It's pretty obvious about when the transition from that phase to the next, the "I've got to come up with something to write" took place.  The pace of writing really slowed down, the topics were (often) more forced, etc.


Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #2009 on: November 02, 2021, 01:40:18 PM »
If MMM was promoting the idea of retiring early by easily starting a blog and getting rich I'd agree that not actionable advice for most people. OTOH his message spend less, invest more and be happy is hard to be too critical of and anyone who can hit a reasonable savings rate can follow his index fund investing plan and have a good chance of success.

SwordGuy

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Re: Stop worrying about the 4% rule
« Reply #2010 on: November 02, 2021, 02:24:17 PM »
If MMM was promoting the idea of retiring early by easily starting a blog and getting rich I'd agree that not actionable advice for most people. OTOH his message spend less, invest more and be happy is hard to be too critical of and anyone who can hit a reasonable savings rate can follow his index fund investing plan and have a good chance of success.

Absolutely!   Given that "Half of U.S. adults can’t read a book written at the 8th-grade level." we can't expect most American adults to have solid writing skills.   Or even decent writing skills!   Without those foundational skills the act of writing a decent article doesn't get done quickly.


Jamese20

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Re: Stop worrying about the 4% rule
« Reply #2011 on: November 02, 2021, 02:43:32 PM »

Quote
But in reality he started a blog for fun and it got to a point where it was making in two years what he (and spouse) retired on to begin with.   Some of which he spends, some of which is donated, some is invested in other stuff (commercial buildings, homes). It all comes back to the blog (and forum), without that he wouldn't have the other stuff.   The funny thing is the blog was only good for the first 5ish years, after that it was all garbage


I find this part of MMM totally dishonest. He talks about how he just casually tapped away at this blog thing for "friends" and then all of a sudden it just happened to blow up and now creates a fortune by accident almost. This is total dishonesty - anyone who has attempted to create a blog knows how much time and effort it takes to create a blog that doesnt succeed let alone a one this successful. When I find such things like this it pretty much puts the whole value of the blog into question for alot of people who are making such life altering decisions

For some people, writing is slow and hard.  For some it's fast and easy.    MMM writes like he's explaining stuff over a few beers and adding in some over-the-top sarcasm for fun as he does it.

I've written a whole lot of technical articles and quite a few of them were written pretty quickly, as in an evening with a few hours a couple of days later for editing.   Others were real slogs.   Assuming you have solid writing skills, it just depends on what you're writing, whether you find "the right way" to present the material right off the bat, how well you know the material, how much research you have to do or how much supporting material you have to produce.

It's pretty obvious about when the transition from that phase to the next, the "I've got to come up with something to write" took place.  The pace of writing really slowed down, the topics were (often) more forced, etc.

the general point i am making here is that its quite clear he worked his butt off making this blog, it takes huge effort and focus to create something like this. He didnt just casually type away and accidentally fall into a blogging success. I simply think it is not genuine to portray such effort and focus in this trivial way. He actively focused on making a money making blog - that is very clear to me

boarder42

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Re: Stop worrying about the 4% rule
« Reply #2012 on: November 02, 2021, 03:00:37 PM »

Quote
But in reality he started a blog for fun and it got to a point where it was making in two years what he (and spouse) retired on to begin with.   Some of which he spends, some of which is donated, some is invested in other stuff (commercial buildings, homes). It all comes back to the blog (and forum), without that he wouldn't have the other stuff.   The funny thing is the blog was only good for the first 5ish years, after that it was all garbage


I find this part of MMM totally dishonest. He talks about how he just casually tapped away at this blog thing for "friends" and then all of a sudden it just happened to blow up and now creates a fortune by accident almost. This is total dishonesty - anyone who has attempted to create a blog knows how much time and effort it takes to create a blog that doesnt succeed let alone a one this successful. When I find such things like this it pretty much puts the whole value of the blog into question for alot of people who are making such life altering decisions

For some people, writing is slow and hard.  For some it's fast and easy.    MMM writes like he's explaining stuff over a few beers and adding in some over-the-top sarcasm for fun as he does it.

I've written a whole lot of technical articles and quite a few of them were written pretty quickly, as in an evening with a few hours a couple of days later for editing.   Others were real slogs.   Assuming you have solid writing skills, it just depends on what you're writing, whether you find "the right way" to present the material right off the bat, how well you know the material, how much research you have to do or how much supporting material you have to produce.

It's pretty obvious about when the transition from that phase to the next, the "I've got to come up with something to write" took place.  The pace of writing really slowed down, the topics were (often) more forced, etc.

the general point i am making here is that its quite clear he worked his butt off making this blog, it takes huge effort and focus to create something like this. He didnt just casually type away and accidentally fall into a blogging success. I simply think it is not genuine to portray such effort and focus in this trivial way. He actively focused on making a money making blog - that is very clear to me

thats just one of the many pitfalls that could happen to any early retiree doing something they enjoy.  Then taking a few enterprising steps once the base was established.  I do all sorts of crap for fun and to make my life more efficient that eventually turns into side income.  shame on these early retirees for making money.

the message doesnt change though and its a really good message and easy to follow and it worked for me. and guess what i'm going to make like 15-20k a year doing about 5 hours of work a year dang it i'm not retired!

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #2013 on: November 02, 2021, 04:03:55 PM »
Absolutely!   Given that "Half of U.S. adults can’t read a book written at the 8th-grade level." we can't expect most American adults to have solid writing skills.   Or even decent writing skills!   Without those foundational skills the act of writing a decent article doesn't get done quickly.

It wouldn't even matter if you were equally talented/perhaps more talented than MMM. Jacob over at ERE had a good article about success at blogging and the upshot was timing is everything. Once the dominant sources are in place in a niche it's hard for a new player to break into the market. MMM had a very healthy dose of luck that determined his blogging success that just can't be replicated. However, given he had saved and invested in a solid FIRE plan he would be a successful, if anonymous, retiree had he not turned out to be a famous blogger.

You are right though poor communications skills in the wider population limit the number of people that could write high quality blog posts if they wanted to.

pecunia

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Re: Stop worrying about the 4% rule
« Reply #2014 on: November 02, 2021, 05:38:36 PM »
Absolutely!   Given that "Half of U.S. adults can’t read a book written at the 8th-grade level." we can't expect most American adults to have solid writing skills.   Or even decent writing skills!   Without those foundational skills the act of writing a decent article doesn't get done quickly.

It wouldn't even matter if you were equally talented/perhaps more talented than MMM. Jacob over at ERE had a good article about success at blogging and the upshot was timing is everything. Once the dominant sources are in place in a niche it's hard for a new player to break into the market. MMM had a very healthy dose of luck that determined his blogging success that just can't be replicated. However, given he had saved and invested in a solid FIRE plan he would be a successful, if anonymous, retiree had he not turned out to be a famous blogger.

You are right though poor communications skills in the wider population limit the number of people that could write high quality blog posts if they wanted to.

Well -he's Canadian.  I have been told by Canadians that they have a greater emphasis on the use of proper English in their education system  - so maybe better writing skills should have been better expected of him.  To be honest with you, I have never heard of a Canadian hillbilly.  There are some Canadian Country & Western singers that pretend, but that's just not the same.

I've been told inflation is upon us.  The 4 percent rule is supposed to work with inflation.  Cross your fingers.

nereo

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Re: Stop worrying about the 4% rule
« Reply #2015 on: November 02, 2021, 05:55:05 PM »

the general point i am making here is that its quite clear he worked his butt off making this blog, it takes huge effort and focus to create something like this. He didnt just casually type away and accidentally fall into a blogging success. I simply think it is not genuine to portray such effort and focus in this trivial way. He actively focused on making a money making blog - that is very clear to me

Doesn’t seem that way to me. Shrug.
Pete’s got a very analytical brain with a pinch of OCD tossed in. For those of us that have been around since the early days it didn’t seem like there was much of a plan or a desire to create what this grew into. From a marketing/blogging perspective he pretty much didn’t do all the things one would do if they were trying to gain as many followers as possible. As his audience grew, his blog postings took a nosedive. He waited a year to launch the forum, and when he did he largely ignored it. He didn’t hire anyone to “grow the business” and the server problems were infamous for years. His social media presence remains scant and there’s never been much effort to draw people in via cross-pollinating. And he keeps turning down offers from potential buyers.

The phrase “lucky rather than good” seems an apt way of describing MMM’s (the persona) rise to fame. The timing fit and the space was still pretty empty.

tooqk4u22

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Re: Stop worrying about the 4% rule
« Reply #2016 on: November 02, 2021, 08:05:45 PM »


But in reality he started a blog for fun and it got to a point where it was making in two years what he (and spouse) retired on to begin with.   Some of which he spends, some of which is donated, some is invested in other stuff (commercial buildings, homes). It all comes back to the blog (and forum), without that he wouldn't have the other stuff.   The funny thing is the blog was only good for the first 5ish years, after that it was all garbage


I find this part of MMM totally dishonest. He talks about how he just casually tapped away at this blog thing for "friends" and then all of a sudden it just happened to blow up and now creates a fortune by accident almost. This is total dishonesty - anyone who has attempted to create a blog knows how much time and effort it takes to create a blog that doesnt succeed let alone a one this successful. When I find such things like this it pretty much puts the whole value of the blog into question for alot of people who are making such life altering decisions
[/quote]

timing is everything but the portrait mattered too (after financial crisis/ great recession written by a middle class high income white guy)  that said it can be different.  ERE was a little early and a lot exteme....Basically MMM by accident or design timed it great and caught white lightning, and put out some decent content for 3-5 years and then mailed it in or sold out after that but by that point the hook was in.   


The forum is probably what makes him the most money...suckered (apparently this guy)

ender

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Re: Stop worrying about the 4% rule
« Reply #2017 on: November 03, 2021, 09:37:33 AM »
stop worrying about MMM's motivations

:-)

boarder42

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Re: Stop worrying about the 4% rule
« Reply #2018 on: November 03, 2021, 09:38:55 AM »
stop worrying about MMM's motivations

:-)

haha exactly - show of hands who benefited from what he did in a huge way? 

alright now who has paid him a dime outside of maybe using a referral link to a tool or credit card that made you life better?

Cool so who cares what he made he made us all millionaires. some multimillionaires. 

frugalnacho

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Re: Stop worrying about the 4% rule
« Reply #2019 on: November 03, 2021, 09:40:17 AM »
Some of us are very soon to be millionaires.

TomTX

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pecunia

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Re: Stop worrying about the 4% rule
« Reply #2021 on: November 03, 2021, 11:15:14 AM »
stop worrying about MMM's motivations

:-)

Right!  If you want to worry there's always nuclear warfare and the global warming thing.  That ought to be enough for you.

Jamese20

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Re: Stop worrying about the 4% rule
« Reply #2022 on: November 04, 2021, 05:29:38 AM »
stop worrying about MMM's motivations

:-)

Right!  If you want to worry there's always nuclear warfare and the global warming thing.  That ought to be enough for you.

Nobody is worrying, it is a matter of ethics, the site name is clearly Marketing effort in of itself alone. I think the intention was very clear from the start with focused effort. Fair play to him, I wish I knew how to build one even half as successful, heck a 5th successful even. Just some integrity about it would be preferred

DadJokes

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Re: Stop worrying about the 4% rule
« Reply #2023 on: November 04, 2021, 06:32:02 AM »
stop worrying about MMM's motivations

:-)

Right!  If you want to worry there's always nuclear warfare and the global warming thing.  That ought to be enough for you.

Nobody is worrying, it is a matter of ethics, the site name is clearly Marketing effort in of itself alone. I think the intention was very clear from the start with focused effort. Fair play to him, I wish I knew how to build one even half as successful, heck a 5th successful even. Just some integrity about it would be preferred

Have you seen the clip where he explains how he came up with the name? It literally sounded like something he came up with while drinking.

Jamese20

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Re: Stop worrying about the 4% rule
« Reply #2024 on: November 04, 2021, 07:41:33 AM »
stop worrying about MMM's motivations

:-)

Right!  If you want to worry there's always nuclear warfare and the global warming thing.  That ought to be enough for you.

Nobody is worrying, it is a matter of ethics, the site name is clearly Marketing effort in of itself alone. I think the intention was very clear from the start with focused effort. Fair play to him, I wish I knew how to build one even half as successful, heck a 5th successful even. Just some integrity about it would be preferred

Have you seen the clip where he explains how he came up with the name? It literally sounded like something he came up with while drinking.

Its an internet marketing type name with the 3 MMMs, if you believe the idea he just sat around drinking and the next thing you know all this is built, well I don't know what to say. Hours upon hours went into this.

Malcat

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Re: Stop worrying about the 4% rule
« Reply #2025 on: November 04, 2021, 07:49:53 AM »
stop worrying about MMM's motivations

:-)

Right!  If you want to worry there's always nuclear warfare and the global warming thing.  That ought to be enough for you.

Nobody is worrying, it is a matter of ethics, the site name is clearly Marketing effort in of itself alone. I think the intention was very clear from the start with focused effort. Fair play to him, I wish I knew how to build one even half as successful, heck a 5th successful even. Just some integrity about it would be preferred

Have you seen the clip where he explains how he came up with the name? It literally sounded like something he came up with while drinking.

Its an internet marketing type name with the 3 MMMs, if you believe the idea he just sat around drinking and the next thing you know all this is built, well I don't know what to say. Hours upon hours went into this.

True, but someone can put hours and hours of work into a project with absolutely no intention or expectation of it becoming profitable.

I've personally invested hundreds and hundreds of hours into projects that might, buy probably won't pay off, and some of them do and most of them don't.

If one of them makes money, I still maintain that I was just noodling around and having fun, not trying to make a business out of it.

Having a project become successful is a very different process than setting out to build a successful business.

EscapeVelocity2020

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Re: Stop worrying about the 4% rule
« Reply #2026 on: November 04, 2021, 08:05:33 AM »
stop worrying about MMM's motivations

:-)

Right!  If you want to worry there's always nuclear warfare and the global warming thing.  That ought to be enough for you.

Nobody is worrying, it is a matter of ethics, the site name is clearly Marketing effort in of itself alone. I think the intention was very clear from the start with focused effort. Fair play to him, I wish I knew how to build one even half as successful, heck a 5th successful even. Just some integrity about it would be preferred

Have you seen the clip where he explains how he came up with the name? It literally sounded like something he came up with while drinking.

Its an internet marketing type name with the 3 MMMs, if you believe the idea he just sat around drinking and the next thing you know all this is built, well I don't know what to say. Hours upon hours went into this.

True, but someone can put hours and hours of work into a project with absolutely no intention or expectation of it becoming profitable.

I've personally invested hundreds and hundreds of hours into projects that might, buy probably won't pay off, and some of them do and most of them don't.

If one of them makes money, I still maintain that I was just noodling around and having fun, not trying to make a business out of it.

Having a project become successful is a very different process than setting out to build a successful business.

I'm not sure why we're 'disagreeing' about all of this on the 4% Rule thread, unless @Jamese20 actually does not think MMM / Pete could have survived on 4% of his 'stache.  There is no doubt MMM spent time and effort turning this in to a profitable enterprise, blogging is not easy.  Just managing the comments on a post is a PITA, let alone all the solicitations and business emails that come with the success he has seen.  You also have a lot of back end stuff like scaling so your site runs smoothly, updating old posts that you've changed your mind on (like his praise of his breadmaker), and managing the financials - taxes and whatnot.  But who cares?  I believe MMM would have stayed ER (at least, true to his own definition of 'retired') even if he hadn't made a dime from his blog.  His life might have looked a lot different, but he would not have gone back to work in software.

If you disagree with that, then maybe you can explain why the 4% rule would have failed for him and we can move on to a more productive discussion...  Just my 2 cents

nereo

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Re: Stop worrying about the 4% rule
« Reply #2027 on: November 04, 2021, 08:24:51 AM »
stop worrying about MMM's motivations

:-)

Right!  If you want to worry there's always nuclear warfare and the global warming thing.  That ought to be enough for you.

Nobody is worrying, it is a matter of ethics, the site name is clearly Marketing effort in of itself alone. I think the intention was very clear from the start with focused effort. Fair play to him, I wish I knew how to build one even half as successful, heck a 5th successful even. Just some integrity about it would be preferred

Have you seen the clip where he explains how he came up with the name? It literally sounded like something he came up with while drinking.

Its an internet marketing type name with the 3 MMMs, if you believe the idea he just sat around drinking and the next thing you know all this is built, well I don't know what to say. Hours upon hours went into this.

You keep talking bout the 'ethics' of it all and suggesting this is some long drawn out plan, despite any claims.  I don't really get your ethical argument, but whatever. A far better case has been made that his annual accounting of expenses which ignore things like the Boliva trip seem to have far more legitimacy. 

If Pete had a detailed long-game with creating MMM he did a pretty crap-tastic job implementing it.  As I said, he pretty much didn't do all the things a blogger focused on generating revenue and followers normally do. As for it taking hours and hours to come up with the concept of MMM - meh; i've spent hours coming up with band names I'll never start, construction projects I'll never do and screenplays I'll never get out of my sketchbook. At the same time I've spent hundreds of hours on hobbies I don't expect to monetize (even though some occasionally do).  Spending time on something doesn't mean diddly.

Retire-Canada

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Re: Stop worrying about the 4% rule
« Reply #2028 on: November 04, 2021, 08:44:00 AM »
I'm not sure why we're 'disagreeing' about all of this on the 4% Rule thread,...

Good question. The more OT posts in this thread the less useful it is for people in the future as a resource.

Jamese20

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Re: Stop worrying about the 4% rule
« Reply #2029 on: November 04, 2021, 08:51:06 AM »
stop worrying about MMM's motivations

:-)

Right!  If you want to worry there's always nuclear warfare and the global warming thing.  That ought to be enough for you.

Nobody is worrying, it is a matter of ethics, the site name is clearly Marketing effort in of itself alone. I think the intention was very clear from the start with focused effort. Fair play to him, I wish I knew how to build one even half as successful, heck a 5th successful even. Just some integrity about it would be preferred

Have you seen the clip where he explains how he came up with the name? It literally sounded like something he came up with while drinking.

Its an internet marketing type name with the 3 MMMs, if you believe the idea he just sat around drinking and the next thing you know all this is built, well I don't know what to say. Hours upon hours went into this.

True, but someone can put hours and hours of work into a project with absolutely no intention or expectation of it becoming profitable.

I've personally invested hundreds and hundreds of hours into projects that might, buy probably won't pay off, and some of them do and most of them don't.

If one of them makes money, I still maintain that I was just noodling around and having fun, not trying to make a business out of it.

Having a project become successful is a very different process than setting out to build a successful business.

I'm not sure why we're 'disagreeing' about all of this on the 4% Rule thread, unless @Jamese20 actually does not think MMM / Pete could have survived on 4% of his 'stache.  There is no doubt MMM spent time and effort turning this in to a profitable enterprise, blogging is not easy.  Just managing the comments on a post is a PITA, let alone all the solicitations and business emails that come with the success he has seen.  You also have a lot of back end stuff like scaling so your site runs smoothly, updating old posts that you've changed your mind on (like his praise of his breadmaker), and managing the financials - taxes and whatnot.  But who cares?  I believe MMM would have stayed ER (at least, true to his own definition of 'retired') even if he hadn't made a dime from his blog.  His life might have looked a lot different, but he would not have gone back to work in software.

If you disagree with that, then maybe you can explain why the 4% rule would have failed for him and we can move on to a more productive discussion...  Just my 2 cents

No it is a valid point, I was just agreeing and aligning with the original claims regarding expenses. I did not mean to hi-Jack it, the 4% rule is sound you will not get any arguments from me - in fact 5% could even be a play

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Re: Stop worrying about the 4% rule
« Reply #2030 on: November 04, 2021, 09:00:29 AM »
The MMM website was pretty plain Jane back in 2012 when I first found it.   Even now it's not all that fancy.   He didn't interact with the blog comments all that much and only for a day or three per post.  He's pretty much ignored the forum.   In the early days he had volunteers help him with issues with the forum.

He had compelling and useful content and he added new content fairly regularly when he started out.  There really weren't that many people doing personal finance blogs and damn few from a perspective near his.  That's what it takes.

DaTrill

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Re: Stop worrying about the 4% rule
« Reply #2031 on: December 02, 2021, 04:08:23 PM »
Since this has nothing to do with the 4% rule, has anyone ever seen Pete, Dorsey and Zuckerberg in the same room at the same time?  MMM forum and blog might be another CIA scheme?  What will happen to MMM when "Pete" if that's his real name, retires from the CIA?   

vand

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Re: Stop worrying about the 4% rule
« Reply #2032 on: December 07, 2021, 08:19:27 AM »
I wonder if there are any simulations where you back test a gradual glidepath into your target long term withdrawal amounts?

Let me give an example:

You target a $1m portfolio to provide 40k income in today's dollars, usual 4% stuff. 

What do the simulations look like if you start off just withdrawing 3% in the first year, and increase that amount by an inflation adjusted $2500 for each year so that only in the 4th year are you taking your full desired amount.

Could have different starting withdrawal amounts, rate of increases to give different glidepaths into the long term spending amount.




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Re: Stop worrying about the 4% rule
« Reply #2033 on: December 07, 2021, 08:24:50 AM »
I wonder if there are any simulations where you back test a gradual glidepath into your target long term withdrawal amounts?

Let me give an example:

You target a $1m portfolio to provide 40k income in today's dollars, usual 4% stuff. 

What do the simulations look like if you start off just withdrawing 3% in the first year, and increase that amount by an inflation adjusted $2500 for each year so that only in the 4th year are you taking your full desired amount.

Could have different starting withdrawal amounts, rate of increases to give different glidepaths into the long term spending amount.

there are so many unique scenarios - but you could back test this by just using income in the cfiresim calculation create annual income events that last 1 year each of the first few years. 

in my personal scenario i might be as low as a 1.7% SWR at this point based on my wife and i's new found hobby businesses. 

struggleism

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Re: Stop worrying about the 4% rule
« Reply #2034 on: January 24, 2022, 08:29:33 AM »
Has this been discussed: https://www.financialsamurai.com/proper-safe-withdrawal-rate/

Personally I disregarded most of it - but I am interested in whether others share the same view that 4% is no longer relevant in the low bond yield environment ?

Yeah, it's probably been discussed, we used to discuss FS articles until we all basically agreed to stop feeding the troll.

Many members here won't click SF links because he's lost that much credibility.

Honest question- why, in a nutshell, does that site lack credibility?

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Re: Stop worrying about the 4% rule
« Reply #2035 on: January 24, 2022, 08:34:43 AM »
Has this been discussed: https://www.financialsamurai.com/proper-safe-withdrawal-rate/

Personally I disregarded most of it - but I am interested in whether others share the same view that 4% is no longer relevant in the low bond yield environment ?

Yeah, it's probably been discussed, we used to discuss FS articles until we all basically agreed to stop feeding the troll.

Many members here won't click SF links because he's lost that much credibility.

Honest question- why, in a nutshell, does that site lack credibility?

Some of his early stuff was quite decent.   My opinion is that he got addicted to making lots of money off his site so he started  click-bait whoring -- lots of click-bait bullshit full of half-baked ideas, suspect logic, and click-bait titles, etc.     And to top it off, he's rich and I find him whiny about it, which is simply unbearable to me.

Other people may have different opinions about him and his work.   You now know mine.

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Re: Stop worrying about the 4% rule
« Reply #2036 on: January 24, 2022, 09:18:59 AM »
Has this been discussed: https://www.financialsamurai.com/proper-safe-withdrawal-rate/

Personally I disregarded most of it - but I am interested in whether others share the same view that 4% is no longer relevant in the low bond yield environment ?

Yeah, it's probably been discussed, we used to discuss FS articles until we all basically agreed to stop feeding the troll.

Many members here won't click SF links because he's lost that much credibility.

Honest question- why, in a nutshell, does that site lack credibility?

Just like MMM, his site is free to read and take their non-expert opinions at your own peril.  I do not think FS is a troll, he is pretty honest that he likes money and upward mobility (living his best life, as he chooses to define it), but he's not FIRE in the way MMM and ERE are, so maybe it's unfair that he's lumped in to the same crowd?

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Re: Stop worrying about the 4% rule
« Reply #2037 on: January 24, 2022, 09:26:12 AM »
Just for fun, Wade Pfau is out again with another 4% Rule update - https://www.barrons.com/articles/retirement-4-percent-rule-downturn-strategy-51642806039
Quote
While many retirees are banking on a continuing rise in stocks to keep their portfolios growing, Pfau worries that markets will plunge and imperil this “overly optimistic” approach. He has embraced oft-criticized insurance products like variable annuities and whole-life insurance that will hold their value even if stocks crash, and he has done consulting work for insurers. He wrote another book, “Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement,” because these loans also can be used as “buffer assets” during market meltdowns.

Plenty of material to attack, for those so inclined.  I worry that his opinions are compromised by the scammy annuity and reverse mortgage industries, but once you take the pinch of salt, the rest of it is a worthwhile read.  For example, he mentions how unrealistic mechanically spending 4% every year is.

dividendman

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Re: Stop worrying about the 4% rule
« Reply #2038 on: January 24, 2022, 09:32:21 AM »
Just for fun, Wade Pfau is out again with another 4% Rule update - https://www.barrons.com/articles/retirement-4-percent-rule-downturn-strategy-51642806039
Quote
While many retirees are banking on a continuing rise in stocks to keep their portfolios growing, Pfau worries that markets will plunge and imperil this “overly optimistic” approach. He has embraced oft-criticized insurance products like variable annuities and whole-life insurance that will hold their value even if stocks crash, and he has done consulting work for insurers. He wrote another book, “Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement,” because these loans also can be used as “buffer assets” during market meltdowns.

Plenty of material to attack, for those so inclined.  I worry that his opinions are compromised by the scammy annuity and reverse mortgage industries, but once you take the pinch of salt, the rest of it is a worthwhile read.  For example, he mentions how unrealistic mechanically spending 4% every year is.

I don't get why anyone buys an annuity unless you know you're terrible with money and will spend every dime you have. They're paying you back with your own money at a rate that's usually less than inflation, never mind average market returns.

Also... the rule of thumb with insurance should be to get the minimum you can and only cover things that can actually bankrupt you. For instance, I don't get collision or comprehensive coverage on my car (if your car is a very small portion of your net worth, as it should be, insuring it against damage makes no sense) but do have umbrella insurance in case of getting sued.

People get all sorts of crazy insurance. Phone insurance? Computer insurance? TV insurance? It's nuts.... I wish I had the money to start an insurance company.

EscapeVelocity2020

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Re: Stop worrying about the 4% rule
« Reply #2039 on: January 24, 2022, 09:51:54 AM »
Just for fun, Wade Pfau is out again with another 4% Rule update - https://www.barrons.com/articles/retirement-4-percent-rule-downturn-strategy-51642806039
Quote
While many retirees are banking on a continuing rise in stocks to keep their portfolios growing, Pfau worries that markets will plunge and imperil this “overly optimistic” approach. He has embraced oft-criticized insurance products like variable annuities and whole-life insurance that will hold their value even if stocks crash, and he has done consulting work for insurers. He wrote another book, “Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement,” because these loans also can be used as “buffer assets” during market meltdowns.

Plenty of material to attack, for those so inclined.  I worry that his opinions are compromised by the scammy annuity and reverse mortgage industries, but once you take the pinch of salt, the rest of it is a worthwhile read.  For example, he mentions how unrealistic mechanically spending 4% every year is.

I don't get why anyone buys an annuity unless you know you're terrible with money and will spend every dime you have. They're paying you back with your own money at a rate that's usually less than inflation, never mind average market returns.

Also... the rule of thumb with insurance should be to get the minimum you can and only cover things that can actually bankrupt you. For instance, I don't get collision or comprehensive coverage on my car (if your car is a very small portion of your net worth, as it should be, insuring it against damage makes no sense) but do have umbrella insurance in case of getting sued.

People get all sorts of crazy insurance. Phone insurance? Computer insurance? TV insurance? It's nuts.... I wish I had the money to start an insurance company.

I agree with you on both the annuity and insurance, but if you 'know what you are doing', they can help hedge.

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Re: Stop worrying about the 4% rule
« Reply #2040 on: January 24, 2022, 09:58:01 AM »
...

I don't get why anyone buys an annuity unless you know you're terrible with money and will spend every dime you have. They're paying you back with your own money at a rate that's usually less than inflation, never mind average market returns.

...

I think this is really the key element. Lots of people are terrible with money and spend every dime they have. The best case scenario would be helping everyone understand average market returns and spending below income, but that's a difficult thing to do (speaking as someone who's tried to have this conversation with siblings). Annuities serve a market for people who know they can't be trusted with their own money - I don't love it, but it seems like annuities are reasonably important for some folks. I only mention this because sometimes, annuities do serve a purpose - and it's exactly the one you identify in your post.

That said, annuities are definitely sold to people who they're not appropriate for, by scammy people looking for a commission. That's morally wrong, and strong regulation requiring advisors be fiduciary seems like a great idea. I don't want this to read as pro-annuity, only to highlight a different use case.

vand

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Re: Stop worrying about the 4% rule
« Reply #2041 on: January 24, 2022, 10:09:03 AM »
Annuities make slightly more sense the older you get, as the variance in the number of remaining years you have left actually increases (in percentage terms).  If you are 50 then you can reasonably expect to have a 30-50yr drawdown period. In terms of picking an initial SWR it doesn't actually make that much difference.

However, if you are, say 75 then you don't know if you have 2 years or 22 years left - either is quite easily possible.  This presents a big problem in terms of judging what SWR you can continue to use from that point.

ChpBstrd

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Re: Stop worrying about the 4% rule
« Reply #2042 on: February 02, 2022, 11:15:18 AM »
People get all sorts of crazy insurance. Phone insurance? Computer insurance? TV insurance? It's nuts.... I wish I had the money to start an insurance company.

TRV has a PE of 12 and yields 2%.
MET has a PE of 11.3 and yields 2.8%.
AFL has a PE of 10.3 and yields 2.1%.
PRU has a PE of 6.2 and yields 4%.

All are rising against the market tide in anticipation of higher interest rates, which help them earn more on their reserves.

And... hey look at that!... all yield more than an annuity!

Parametric Censorship

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Re: Stop worrying about the 4% rule
« Reply #2043 on: March 12, 2022, 12:35:30 PM »
The recent Big ERN post is a well-reasoned take on a lower current withdrawal target: https://earlyretirementnow.com/2022/02/28/retirement-in-a-high-inflation-environment-swr-series-part-51/

Ignoring his forecast models (because we don't know the future) and just taking model 4 (the best of his regressions which can be done with actual, currently observable data), we get:

1.47% + 0.553 * CAEY + 0.433 * 10 year yield - 0.312 * short-term yield + 0.005 * 1 year trailing CPI = 3.83%

This is the approximate midpoint withdrawal rate, not the worst case (best fit through the sustainable withdrawal rate history). Applying a simpler subset of the model, he eyeballs the graph and cuts off 1.25% to get back to an estimate of a SAFEMAX, as can be visualized below. You may instead be moved by his later argument to cut off something closer to 0.2% by replaying the historical worst case against the predictions. These are both highly contentious approaches, IMO. In any case, the computed SAFEMAX comes out to be substantially less than 4%. I would suspect something more principled on transforming these median-SWRs to SAFEMAX could be done by using his standard error numbers, but I haven't thought about the statistical implications myself.



This model sets a final value target of 25% of the initial portfolio after 30 years. This is not the same as Trinity 4% which allowed the worst case to deplete the portfolio. I think this is a reasonable way to mathematically address that most of us have longer than 30 year horizons, but you may disagree or believe that the adjustment for SAFEMAX is effectively double-safety with this in mind.

I say well-reasoned, because the reasoning is thoughtful and data-driven, not because I think it is a reason to "worry about the 4% rule." The personal complexity of applied withdrawal rates is real and probably anyone who can get to 25x expenses saved will never have an actual concern of running out of assets for a whole range of preservational reasons. I've been trying to be semi-to-fully early retired since 2017 and have yet to make a single withdrawal from my retirement assets due to additional income "here and there" more than covering all my costs.

I definitely expect to have "failed" at early retirement by working too much and not spending enough while I'm young and healthy.
« Last Edit: March 12, 2022, 01:06:47 PM by Parametric Censorship »

ChpBstrd

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Re: Stop worrying about the 4% rule
« Reply #2044 on: March 14, 2022, 08:34:58 AM »
@Parametric Censorship there's a case to be made that a person with a portfolio too small to retire on, and with limited income to grow that portfolio organically, could have spent the last 25 years just waiting for the next crisis to hit. After the dot-com bubble, after the GFC, and in the midst of the COVID correction would have all been great times to buy - probably good enough to support a 5% WR for 30y, but all the numbers aren't in yet.

The U.S. in particular has become a lot less stable than it was in prior decades. The 1999 repeal of the Depression-era Glass-Steagall Act allowed banks to mingle their investing and lending funds, which means deposits tend to chase the latest investment fad and lending gets cut back when investments do poorly - a pro-cyclical feedback mechanism. Most of the reforms introduced after the GFC, such as the Dodd-Frank bill, have been steadily watered down. Meanwhile, the increasing share of the economy that is devoted to services - most of which are discretionary - means layoffs are more pro-cyclical than in the past. The decline of traditional journalism and the rise of social media mean that corruption is less likely to be rooted out, tribal hatred is on the rise, and people are making worse decisions based on lower-quality information. The deaths of a million Americans from COVID amid conspiracy theories might be just the start of our descent into idiocy. Then there are the volatility-increasing effects of the national debt and deficits, the decline of the middle class, student loan burdens, and subsidy-driven boom-bust cycles in housing. The unaffordability of housing and higher education is leading to demographic graying, which means fewer workers supporting more non-workers, and increased reliance on cyclical investments.

If anything, it appears that we're moving in the opposite direction of stabilizing things. People are doubling down on getting their info from podcasters and YouTube/TikTok influencers rather than subscribing to journalists, despite watching people literally die from accepting internet info. A coup was attempted in the U.S. just last year, and more attempts are in the works. Meanwhile, housing prices are well beyond sustainable levels even as interest rates are rising and nobody is doing anything about any of this stuff. Our best hope of stabilization might be for a new cold war to unite people around certain realities, and that's the best longshot we have.

So, why not hang out in short-term bonds or gold and wait for the next major correction to dive into stocks and retire on a 5% WR? One reason might be that, contrary to expectations, the next crisis/opportunity might not come around for a half-dozen years or more, by which time a person riding the markets' waves would probably have retired earlier than the person waiting for a CAEY that supports a 5% or 6% WR.

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Re: Stop worrying about the 4% rule
« Reply #2045 on: March 14, 2022, 09:16:54 AM »
@Parametric Censorship there's a case to be made that a person with a portfolio too small to retire on, and with limited income to grow that portfolio organically, could have spent the last 25 years just waiting for the next crisis to hit. After the dot-com bubble, after the GFC, and in the midst of the COVID correction would have all been great times to buy - probably good enough to support a 5% WR for 30y, but all the numbers aren't in yet.

The U.S. in particular has become a lot less stable than it was in prior decades. The 1999 repeal of the Depression-era Glass-Steagall Act allowed banks to mingle their investing and lending funds, which means deposits tend to chase the latest investment fad and lending gets cut back when investments do poorly - a pro-cyclical feedback mechanism. Most of the reforms introduced after the GFC, such as the Dodd-Frank bill, have been steadily watered down. Meanwhile, the increasing share of the economy that is devoted to services - most of which are discretionary - means layoffs are more pro-cyclical than in the past. The decline of traditional journalism and the rise of social media mean that corruption is less likely to be rooted out, tribal hatred is on the rise, and people are making worse decisions based on lower-quality information. The deaths of a million Americans from COVID amid conspiracy theories might be just the start of our descent into idiocy. Then there are the volatility-increasing effects of the national debt and deficits, the decline of the middle class, student loan burdens, and subsidy-driven boom-bust cycles in housing. The unaffordability of housing and higher education is leading to demographic graying, which means fewer workers supporting more non-workers, and increased reliance on cyclical investments.

If anything, it appears that we're moving in the opposite direction of stabilizing things. People are doubling down on getting their info from podcasters and YouTube/TikTok influencers rather than subscribing to journalists, despite watching people literally die from accepting internet info. A coup was attempted in the U.S. just last year, and more attempts are in the works. Meanwhile, housing prices are well beyond sustainable levels even as interest rates are rising and nobody is doing anything about any of this stuff. Our best hope of stabilization might be for a new cold war to unite people around certain realities, and that's the best longshot we have.

So, why not hang out in short-term bonds or gold and wait for the next major correction to dive into stocks and retire on a 5% WR? One reason might be that, contrary to expectations, the next crisis/opportunity might not come around for a half-dozen years or more, by which time a person riding the markets' waves would probably have retired earlier than the person waiting for a CAEY that supports a 5% or 6% WR.

And,.....you didn't even mention the Ukraine thing.  We could have World War 3.  Even without it, cutting Russia's resources from the world economy is a short term bad bump.  As I read your well written paragraphs, the thought occurred to me that the US is only 5 percent of the world's population.  As the economies of the rest of the world grow as they surely will, the bizarre behavior in the US may be more than offset by gains in international investments and the 4 percent rule will continue to rule.

Parametric Censorship

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Re: Stop worrying about the 4% rule
« Reply #2046 on: March 14, 2022, 09:30:55 AM »
As the economies of the rest of the world grow as they surely will, the bizarre behavior in the US may be more than offset by gains in international investments and the 4 percent rule will continue to rule.

It is good to note that international and emerging are all "cheap" by the earnings yield metric (as is small value, but that's self-referential). ERN talks about US large caps because that's the typical backtested SWR allocation, but using a tool like Tyler's you may be convinced that hedging that with some value is in a retiree's best interest.

I'm not sure the wait-for-a-panic timing strategy is a useful one, because of course we would not have been able to forecast the rate at which those panics would come. This is a distinct argument from that of ERN's model.

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Re: Stop worrying about the 4% rule
« Reply #2047 on: March 14, 2022, 09:35:30 AM »
As the economies of the rest of the world grow as they surely will, the bizarre behavior in the US may be more than offset by gains in international investments and the 4 percent rule will continue to rule.

It is good to note that international and emerging are all "cheap" by the earnings yield metric (as is small value, but that's self-referential). ERN talks about US large caps because that's the typical backtested SWR allocation, but using a tool like Tyler's you may be convinced that hedging that with some value is in a retiree's best interest.

I'm not sure the wait-for-a-panic timing strategy is a useful one, because of course we would not have been able to forecast the rate at which those panics would come. This is a distinct argument from that of ERN's model.

Agreed. It all reeks of trying to time the market which is of course a loser approach.  After all the time and effort by MMM to get people to 'set and forget' their investing strategy, there are still a lot of people on this board going in to panic mode at every dip in the market.  It's astonishing to watch, actually.

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Re: Stop worrying about the 4% rule
« Reply #2048 on: March 18, 2022, 06:56:08 PM »
what's a CAEY?

MDM

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Re: Stop worrying about the 4% rule
« Reply #2049 on: March 18, 2022, 07:11:11 PM »

 

Wow, a phone plan for fifteen bucks!