Author Topic: Stop worrying about the 4% rule  (Read 1145965 times)

mistymoney

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lutorm

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Re: Stop worrying about the 4% rule
« Reply #2052 on: July 10, 2022, 07:43:56 PM »
Arguably for a 60 year horizon we have an even worse idea of the real failure rate since there are only 2 fully independent such retirement periods since 1900...

nereo

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Re: Stop worrying about the 4% rule
« Reply #2053 on: July 11, 2022, 04:32:15 AM »
Arguably for a 60 year horizon we have an even worse idea of the real failure rate since there are only 2 fully independent such retirement periods since 1900...

If we are viewing things from that lens, there can be only ONE ‘fully independent’ 60 year period since 1903.  That doesn’t mean that we can’t infer much from using multiple, overlapping periods. Regardless of whether you are using a 20, 30, or 60 year rolling period, what stands out is how substantially different each period performs, even when they overlap by >90%.  Put another way, multi-decade periods whose start dates are just 1-2 years apart can increase in value or fail completely. Such is the power of SORR


There’s a human tendency to want “more data!” - The underlying belief being that we’d improve both our precision and accuracy for longer-term modeling. Highly variable systems don’t work like that.  Even if we had another 50 or even 100 years of highly accurate market returns we’d see much the same patterns; most portfolios do just find with sub-5% WR, while a few fail miserably. Most failures occur due to poor performance in the first decade (and typically within the first 6 years).

tooqk4u22

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Re: Stop worrying about the 4% rule
« Reply #2054 on: July 11, 2022, 05:37:30 PM »
Arguably for a 60 year horizon we have an even worse idea of the real failure rate since there are only 2 fully independent such retirement periods since 1900...

The reality it's difficult to predict out five years let alone 30 or 60 as there is too much unknown....wars, family, tech changes, who knows.   But it stands to reason if you can make it work for 30 years then you should be able to make it work for 60.   

History from other countries would suggest that a war on our soil would be most devastating and unrecoverable for a long time

ender

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Re: Stop worrying about the 4% rule
« Reply #2055 on: July 12, 2022, 10:09:05 AM »
No one in their right mind should expect a 30 year old can reliably predict their expenses for six decades and expect them to be constant throughout that duration.


nereo

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Re: Stop worrying about the 4% rule
« Reply #2056 on: July 12, 2022, 10:32:36 AM »
No one in their right mind should expect a 30 year old can reliably predict their expenses for six decades and expect them to be constant throughout that duration.

I take a different view here.  So often I hear "how am I supposed to know what my expenses will be X years from now??!!" yet the daily reality of most working people is that they have a largely fixed income, and that income dictates their spending.

So why is it so different for the retirement phase?  IME most retirees have a long-ago determined "income" (typically a mixture of SS, pension and withdrawals from savings) and whatever that is, that's what they live on.
If I say right now "I'm going to live on the 2022 equivalent of $40k/year" (or $100k or whatever)... wouldn't I largely design my lifestyle around this amount?    Does it matter if that's 5 years in the future or 40?

EscapeVelocity2020

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Re: Stop worrying about the 4% rule
« Reply #2057 on: July 12, 2022, 11:25:29 AM »
I try to frame it more as, if I work one more year to grow my stash $100k, then that’s $4k more I can spend per year or $100k in buffer for unexpected health, family expenses, charity…. So is this OMY worth that trade off?  (My numbers are different than this, but that’s the general framework).

pecunia

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Re: Stop worrying about the 4% rule
« Reply #2058 on: July 12, 2022, 02:10:47 PM »
I try to frame it more as, if I work one more year to grow my stash $100k, then that’s $4k more I can spend per year or $100k in buffer for unexpected health, family expenses, charity…. So is this OMY worth that trade off?  (My numbers are different than this, but that’s the general framework).

Until this recession (or near recession) if your stash was larger than that required for 4 percent withdrawal, your stash would have grown even when you were retired giving you two valuable things 1) Time you will never get back 2) the margin you desire

charis

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Re: Stop worrying about the 4% rule
« Reply #2059 on: July 12, 2022, 02:51:20 PM »
No one in their right mind should expect a 30 year old can reliably predict their expenses for six decades and expect them to be constant throughout that duration.

I take a different view here.  So often I hear "how am I supposed to know what my expenses will be X years from now??!!" yet the daily reality of most working people is that they have a largely fixed income, and that income dictates their spending.

So why is it so different for the retirement phase?  IME most retirees have a long-ago determined "income" (typically a mixture of SS, pension and withdrawals from savings) and whatever that is, that's what they live on.
If I say right now "I'm going to live on the 2022 equivalent of $40k/year" (or $100k or whatever)... wouldn't I largely design my lifestyle around this amount?    Does it matter if that's 5 years in the future or 40?

I agree that you can, but there are things that are difficult to predict, especially if you have dependents. The pandemic for instance created an unpredictable new cost for child and tuition would not have been necessary. A) we suddenly needed child care for fully remote school age children in order to keep our in-person jobs B) we discovered that remote learning 100% did not work for the 7 year ago and said child had a learning difficulty that compounded the situation and required expensive in-person services. 

We could have without these expenses with detrimental results, both career and educational.  Just an example of the many crazy situations that life can and will throw at us.

nereo

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Re: Stop worrying about the 4% rule
« Reply #2060 on: July 12, 2022, 03:30:40 PM »
No one in their right mind should expect a 30 year old can reliably predict their expenses for six decades and expect them to be constant throughout that duration.

I take a different view here.  So often I hear "how am I supposed to know what my expenses will be X years from now??!!" yet the daily reality of most working people is that they have a largely fixed income, and that income dictates their spending.

So why is it so different for the retirement phase?  IME most retirees have a long-ago determined "income" (typically a mixture of SS, pension and withdrawals from savings) and whatever that is, that's what they live on.
If I say right now "I'm going to live on the 2022 equivalent of $40k/year" (or $100k or whatever)... wouldn't I largely design my lifestyle around this amount?    Does it matter if that's 5 years in the future or 40?

I agree that you can, but there are things that are difficult to predict, especially if you have dependents. The pandemic for instance created an unpredictable new cost for child and tuition would not have been necessary. A) we suddenly needed child care for fully remote school age children in order to keep our in-person jobs B) we discovered that remote learning 100% did not work for the 7 year ago and said child had a learning difficulty that compounded the situation and required expensive in-person services. 

We could have without these expenses with detrimental results, both career and educational.  Just an example of the many crazy situations that life can and will throw at us.

Sure, but how does that change anything with regards to retirement? You still need to guesstimate a number, build in some amount of safety, and then you live on what you have or change how you live. Much as you do while your money comes from your job.

charis

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Re: Stop worrying about the 4% rule
« Reply #2061 on: July 12, 2022, 03:44:02 PM »
No one in their right mind should expect a 30 year old can reliably predict their expenses for six decades and expect them to be constant throughout that duration.

I take a different view here.  So often I hear "how am I supposed to know what my expenses will be X years from now??!!" yet the daily reality of most working people is that they have a largely fixed income, and that income dictates their spending.

So why is it so different for the retirement phase?  IME most retirees have a long-ago determined "income" (typically a mixture of SS, pension and withdrawals from savings) and whatever that is, that's what they live on.
If I say right now "I'm going to live on the 2022 equivalent of $40k/year" (or $100k or whatever)... wouldn't I largely design my lifestyle around this amount?    Does it matter if that's 5 years in the future or 40?

I agree that you can, but there are things that are difficult to predict, especially if you have dependents. The pandemic for instance created an unpredictable new cost for child and tuition would not have been necessary. A) we suddenly needed child care for fully remote school age children in order to keep our in-person jobs B) we discovered that remote learning 100% did not work for the 7 year ago and said child had a learning difficulty that compounded the situation and required expensive in-person services. 

We could have without these expenses with detrimental results, both career and educational.  Just an example of the many crazy situations that life can and will throw at us.

Sure, but how does that change anything with regards to retirement? You still need to guesstimate a number, build in some amount of safety, and then you live on what you have or change how you live. Much as you do while your money comes from your job.

That's true. And if we had been retired, we could have avoided one of those expenses at least. But it opened my eyes to the possiblity that what I want spend money on, or feel is necessary, is likely to change in the future in ways that I can't fathom right now. So we'll probably build in more safety and plan to work longer or PT. It's plann-able to a certain degree but at 40, I want or need to spend $ on different things than I expected even 5 years ago at 35.

TempusFugit

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Re: Stop worrying about the 4% rule
« Reply #2062 on: July 12, 2022, 04:03:53 PM »
I try to frame it more as, if I work one more year to grow my stash $100k, then that’s $4k more I can spend per year or $100k in buffer for unexpected health, family expenses, charity…. So is this OMY worth that trade off?  (My numbers are different than this, but that’s the general framework).

OMY works in two directions of course. While working you (presumably) add more money to your stash in the form of contributions to your retirement accounts, etc and also you have the money that you didn’t have to take out of your stash to support yourself for that year.  Possibly you could also consider that you have one year of expenses removed on the tail end (‘cause you died).  So that’s three ways OMY can help the math. 

If you contribute $40K per year to your stash in the form of 401k contributions, etc and you spend $60K a year just living your life, that’s effectively $100K more in your stash a year later than would have been there had you retired.  If you assume your life ends at the same age regardless of when you retire, you also have reduced the number of years your stash has to support you (yay?)

Of course this is how we get trapped in the cycle.  You can never know with certainty what will happen.  It’s amazing how every downturn seems like ‘this time it’s different!’ 

EscapeVelocity2020

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Re: Stop worrying about the 4% rule
« Reply #2063 on: July 12, 2022, 04:18:07 PM »
I try to frame it more as, if I work one more year to grow my stash $100k, then that’s $4k more I can spend per year or $100k in buffer for unexpected health, family expenses, charity…. So is this OMY worth that trade off?  (My numbers are different than this, but that’s the general framework).

OMY works in two directions of course. While working you (presumably) add more money to your stash in the form of contributions to your retirement accounts, etc and also you have the money that you didn’t have to take out of your stash to support yourself for that year.  Possibly you could also consider that you have one year of expenses removed on the tail end (‘cause you died).  So that’s three ways OMY can help the math. 

If you contribute $40K per year to your stash in the form of 401k contributions, etc and you spend $60K a year just living your life, that’s effectively $100K more in your stash a year later than would have been there had you retired.  If you assume your life ends at the same age regardless of when you retire, you also have reduced the number of years your stash has to support you (yay?)

Of course this is how we get trapped in the cycle.  You can never know with certainty what will happen.  It’s amazing how every downturn seems like ‘this time it’s different!’

Yeah, the framework is more geared toward a 30 or 40 year old.  At 50 and certainly 60, focus should be on straight up determining living expenses and using the 4% rule. 

lutorm

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Re: Stop worrying about the 4% rule
« Reply #2064 on: July 18, 2022, 01:35:34 PM »
One thing to keep in mind is that minor deviations from your "planned" expenses, like having to pay extra for childcare for a few years, has very little effect over a 40-50 year retirement period. You can also, to some extent, borrow from your future self (although that's subject to sequence of return risk) and compensate by tightening the belt a few years later.

If your expected living expenses are higher than, say, the median income, you can be pretty certain that you will be able to survive even if your desired spending level at some point in the future will be higher. So it's a matter of wants, not needs.

The thing to really worry about, IMHO, are things like major illness, accidents, or children with disabilities leading to huge medical costs, needing long term care, special accommodations, etc. that blow your expenses way past what you've planned for. Those expenses can be large and can justifiably be called "needs".

tooqk4u22

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Re: Stop worrying about the 4% rule
« Reply #2065 on: September 23, 2022, 05:36:49 AM »
Well.....anyone who criticized the 4% bc of low interest rates please know that your concerns have been addressed, feel free to FIRE with ease now.   

Low rates have left the building.   

Attenion SORR crowd there are now plenty of seats available in the front rows.   

Enjoy the show. 

EscapeVelocity2020

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Re: Stop worrying about the 4% rule
« Reply #2066 on: September 23, 2022, 06:59:34 AM »
Well.....anyone who criticized the 4% bc of low interest rates please know that your concerns have been addressed, feel free to FIRE with ease now.   

Low rates have left the building.   

Attenion SORR crowd there are now plenty of seats available in the front rows.   

Enjoy the show.

At least a good sense of humor is appreciating in value today.  It's unfortunate that, even at 4% nominal yield, real returns are still deeply negative.  Happy Friday!

Must_ache

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Re: Stop worrying about the 4% rule
« Reply #2067 on: October 04, 2022, 10:00:10 AM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

The data cover approximately 2,500 years of asset-class returns in 38 developed countries over the period from 1890 to 2019...
The dataset construction methods deliberately combat the survivor and easy data biases that impact prior studies.
We incorporate longevity risk into the simulation design using mortality tables from the Social Security Administration (SSA).
Our base case simulation focuses on the joint investment-longevity outcomes for a couple retiring in 2022 at age 65 who chooses a portfolio strategy of 60% domestic stocks and 40% bonds.
The 4% rule proves woefully inadequate for current retirees.


dividendman

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Re: Stop worrying about the 4% rule
« Reply #2068 on: October 04, 2022, 10:35:53 AM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

The data cover approximately 2,500 years of asset-class returns in 38 developed countries over the period from 1890 to 2019...
The dataset construction methods deliberately combat the survivor and easy data biases that impact prior studies.
We incorporate longevity risk into the simulation design using mortality tables from the Social Security Administration (SSA).
Our base case simulation focuses on the joint investment-longevity outcomes for a couple retiring in 2022 at age 65 who chooses a portfolio strategy of 60% domestic stocks and 40% bonds.
The 4% rule proves woefully inadequate for current retirees.

I'll post the same thing here as in the other thread as well:

So, what this paper is saying is that a 65 year old couple who have an average life expectancy of 86 (i.e. 21 years), needs have 44 years worth of expenses saved... in order to have a 95% success rate (i.e. dying with money)?

Yeah... ok...

dandarc

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Re: Stop worrying about the 4% rule
« Reply #2069 on: October 04, 2022, 10:37:15 AM »
I feel like Financial Samurai might be one of the authors

dandarc

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Re: Stop worrying about the 4% rule
« Reply #2070 on: October 04, 2022, 10:43:13 AM »
Wonder what the success rate was for the 0% withdrawal rate they said they modeled?

Metalcat

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Re: Stop worrying about the 4% rule
« Reply #2071 on: October 04, 2022, 11:04:09 AM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

The data cover approximately 2,500 years of asset-class returns in 38 developed countries over the period from 1890 to 2019...
The dataset construction methods deliberately combat the survivor and easy data biases that impact prior studies.
We incorporate longevity risk into the simulation design using mortality tables from the Social Security Administration (SSA).
Our base case simulation focuses on the joint investment-longevity outcomes for a couple retiring in 2022 at age 65 who chooses a portfolio strategy of 60% domestic stocks and 40% bonds.
The 4% rule proves woefully inadequate for current retirees.

Anyone who actually understands the details of this stuff want to break down the reasoning behind this for me?

Like coles notes "here's why things are different now" sort of summary?

bacchi

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Re: Stop worrying about the 4% rule
« Reply #2072 on: October 04, 2022, 11:11:48 AM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

The data cover approximately 2,500 years of asset-class returns in 38 developed countries over the period from 1890 to 2019...
The dataset construction methods deliberately combat the survivor and easy data biases that impact prior studies.
We incorporate longevity risk into the simulation design using mortality tables from the Social Security Administration (SSA).
Our base case simulation focuses on the joint investment-longevity outcomes for a couple retiring in 2022 at age 65 who chooses a portfolio strategy of 60% domestic stocks and 40% bonds.
The 4% rule proves woefully inadequate for current retirees.

Anyone who actually understands the details of this stuff want to break down the reasoning behind this for me?

Like coles notes "here's why things are different now" sort of summary?

I can't find the paper but, given the number of developed countries, I'll make a guess about the tl;dr.


tl;dr Don't expect a 4% WR if your country has to rebuild from a major war.

2Birds1Stone

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Re: Stop worrying about the 4% rule
« Reply #2073 on: October 04, 2022, 11:13:49 AM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

The data cover approximately 2,500 years of asset-class returns in 38 developed countries over the period from 1890 to 2019...
The dataset construction methods deliberately combat the survivor and easy data biases that impact prior studies.
We incorporate longevity risk into the simulation design using mortality tables from the Social Security Administration (SSA).
Our base case simulation focuses on the joint investment-longevity outcomes for a couple retiring in 2022 at age 65 who chooses a portfolio strategy of 60% domestic stocks and 40% bonds.
The 4% rule proves woefully inadequate for current retirees.

Anyone who actually understands the details of this stuff want to break down the reasoning behind this for me?

Like coles notes "here's why things are different now" sort of summary?

It's just a clickbait paper. Great example of finding data to support your position.

They are using returns data for countries like Japan and Argentina then applying it to this sweet 65 year old American couple that doesn't have Social Security or access to the internet.

Must_ache

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Re: Stop worrying about the 4% rule
« Reply #2074 on: October 04, 2022, 11:29:22 AM »

So, what this paper is saying is that a 65 year old couple who have an average life expectancy of 86 (i.e. 21 years), needs have 44 years worth of expenses saved... in order to have a 95% success rate (i.e. dying with money)?


If I knew I were dying at age 75, it would make my retirement planning much easier.  Assuming the mean is close to the median, half of the people are going to live past 86, and possibly for a number of years.  And who knows what their expenses will be in old age.

Must_ache

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Re: Stop worrying about the 4% rule
« Reply #2075 on: October 04, 2022, 11:35:53 AM »

It's just a clickbait paper. Great example of finding data to support your position.


We all do this, right? 
You find a paper you like that supports a 4% withdrawal rate, and you celebrate it. 
You find a paper that says it should be much higher, everybody loves that.
Then we find one that says maybe it should be lower - instant mockery and hatred.

And I don't understand the clickbait comment either - I don't think four professors from two universities do all of that work with the intention of writing a "clickbait paper".  i think that's just more mockery and hatred.   


Metalcat

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Re: Stop worrying about the 4% rule
« Reply #2076 on: October 04, 2022, 11:44:45 AM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

The data cover approximately 2,500 years of asset-class returns in 38 developed countries over the period from 1890 to 2019...
The dataset construction methods deliberately combat the survivor and easy data biases that impact prior studies.
We incorporate longevity risk into the simulation design using mortality tables from the Social Security Administration (SSA).
Our base case simulation focuses on the joint investment-longevity outcomes for a couple retiring in 2022 at age 65 who chooses a portfolio strategy of 60% domestic stocks and 40% bonds.
The 4% rule proves woefully inadequate for current retirees.

Anyone who actually understands the details of this stuff want to break down the reasoning behind this for me?

Like coles notes "here's why things are different now" sort of summary?

It's just a clickbait paper. Great example of finding data to support your position.

They are using returns data for countries like Japan and Argentina then applying it to this sweet 65 year old American couple that doesn't have Social Security or access to the internet.

Oh...weird

I mean, yeah, we've always known that the 4% rule fails if the systems it's based on fail. Isn't that a given?

But as I've said in this thread an obnoxious amount of times, I'm pretty sure that people in the US are at far more risk of failing to estimate their future expenses properly than they are of having the entire US economy fail to function the way it is expected to over a long period of time.

It is *very* possible, but we'll all likely have much bigger fish to fry than our withdrawal rates.

dandarc

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Re: Stop worrying about the 4% rule
« Reply #2077 on: October 04, 2022, 11:55:35 AM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

The data cover approximately 2,500 years of asset-class returns in 38 developed countries over the period from 1890 to 2019...
The dataset construction methods deliberately combat the survivor and easy data biases that impact prior studies.
We incorporate longevity risk into the simulation design using mortality tables from the Social Security Administration (SSA).
Our base case simulation focuses on the joint investment-longevity outcomes for a couple retiring in 2022 at age 65 who chooses a portfolio strategy of 60% domestic stocks and 40% bonds.
The 4% rule proves woefully inadequate for current retirees.

Anyone who actually understands the details of this stuff want to break down the reasoning behind this for me?

Like coles notes "here's why things are different now" sort of summary?
The concern is that US-centric analysis are assuming repetition of US returns that may not repeat. So they're trying to pull in data from all over the world. To add a cherry on top, they're also looking at expected lifespan in the US. They concluded that 4% rule is riskier than advertised (and them running US-only as a side-by-side lends some credibility as those numbers come in where you'd expect). But I think the analysis is likely flawed, but also don't understand stats well enough to say for sure.

I find the methodology a bit strange - they've got this big list with 29,000 sets of monthly real returns from all these countries (Argentina and Czechoslovakia make up about 1% of these months each). There are only 39 countries, and they've got data going back to 1890 for some of them (US, UK, Germany, other countries you'd probably expect), and then starting more recently as countries joined the ranks of "developed". So the overall set is skewed towards the long-time developed countries, but because of how they're assembling their sets of returns for simulation, the countries with less return data are going to be included at a higher rate particularly at the end of ~10 year periods. To test a given withdraw percentage and allocation, they run 1 million simulations. Each simulation is as follows:

1. Simulate lifespan based on SSA tables



Some details are easy to understand - for any given month, they take that country's returns only and blend them per the allocation.

But then rather than simply randomly selecting returns to fil the simulated lifespan, they do this:

2. Pick a block size ~10 years long "randomly from a geometric distribution with a probability parameter equal to the inverse of the desired block length (120 months)".

3. Pick a random starting point out of the whole 29,000 country-months. Then from that month they include just the one country's returns going forward until either they fill the whole block or they run out of data from that country. If they run out of data on that country before the block is over, then they pick another country randomly from the set of countries and start adding that country's returns <starting from 1 - that's what it says in the paper>.

4. Add the block of returns to the overall returns for this simulation and then go to step 2 - stop when you've got enough months of returns for the entire lifespan being simulated.


I think the "pick a random country" part of it when you don't have a whole block of data is going to lead to overweighting the early returns from the countries with less data in the dataset (a few don't even have the ~10 years of data to fill up a single block). I think this is probably a substantial part of why the global figure they found is so low - overweighting Argentina from 1947-1966 or Israel from 2010-2019 (actually all return data stops in December 2019 for this study). These are countries that came into and out of "developed" status - they might restrict the list of countries to ones that have 1000 data points to make up for this maybe?

Spending is almost a cop-out to me "we're using real returns so we just assume a constant monthly withdrawal at the initial rate". I might be wrong, but not sure handling inflation this way is all that relevant - one simulation might have 5 years of Argentina real returns and we're also assuming we got Argentina's inflation for the spending for that time. Then we switch to Italy's figures or whatever. I don't have the math skills to figure that out but it just strikes me as potentially a problem.

EscapeVelocity2020

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Re: Stop worrying about the 4% rule
« Reply #2078 on: October 04, 2022, 01:53:43 PM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

The data cover approximately 2,500 years of asset-class returns in 38 developed countries over the period from 1890 to 2019...
The dataset construction methods deliberately combat the survivor and easy data biases that impact prior studies.
We incorporate longevity risk into the simulation design using mortality tables from the Social Security Administration (SSA).
Our base case simulation focuses on the joint investment-longevity outcomes for a couple retiring in 2022 at age 65 who chooses a portfolio strategy of 60% domestic stocks and 40% bonds.
The 4% rule proves woefully inadequate for current retirees.

Can you provide the link to the paper?

It raises one somewhat interesting new point, which is that the 4% Rule was based on US-market equities (S&P500) and bonds (long term corporate bonds), as well as the CPI for inflation.  Returns on US assets have had a post-1890 run which isn't average for the rest of the developed world, and most international investors have enthusiastically increased exposure to the US during this time, further juicing this outperformance.  Just as US Treasuries have outperformed just recently for decades during the great moderation, until basically this year when inflation has turned their negligible nominal yields finally in to negative real yields, US equities have had a disproportionate bump.  Under a similar bond 'reversion to mean' assumption for US equity markets (vs. other developed countries), outperformance of the US could eventually give way to outperformance by another superpower in the coming decades...

I'm not going to run out and go 50 / 50 - VTI / VXUS over this possibility, but it's good to be aware of any blind-spots in why the Trinity Study had different results from this paper and it's always good to be aware of how international exposure might help or hurt your portfolio.

dandarc

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Re: Stop worrying about the 4% rule
« Reply #2079 on: October 04, 2022, 02:42:57 PM »
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4227132

is the paper - I'm with the poster who thinks they went searching for data to fit the headline.

nereo

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Re: Stop worrying about the 4% rule
« Reply #2080 on: October 04, 2022, 03:20:58 PM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

Why cross-post this particular article?

tooqk4u22

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Re: Stop worrying about the 4% rule
« Reply #2081 on: October 04, 2022, 03:37:12 PM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

Why cross-post this particular article?

It's what trolls do.

dandarc

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Re: Stop worrying about the 4% rule
« Reply #2082 on: October 04, 2022, 03:52:38 PM »

So, what this paper is saying is that a 65 year old couple who have an average life expectancy of 86 (i.e. 21 years), needs have 44 years worth of expenses saved... in order to have a 95% success rate (i.e. dying with money)?


If I knew I were dying at age 75, it would make my retirement planning much easier.  Assuming the mean is close to the median, half of the people are going to live past 86, and possibly for a number of years.  And who knows what their expenses will be in old age.
They were actually pretty clear about how they computed expected remaining age in the simulations. No need to assume - the exact distribution they used is spelled out in the paper, and based on publicly available data from the Social Security Administration.

Metalcat

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Re: Stop worrying about the 4% rule
« Reply #2083 on: October 04, 2022, 04:16:26 PM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

Why cross-post this particular article?

It's what trolls do.

To be fair, I think this is the exact appropriate place to cross post it. The other thread will disappear, this thread will persist, and this article will be addressed for posterity.

EscapeVelocity2020

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Re: Stop worrying about the 4% rule
« Reply #2084 on: October 04, 2022, 05:29:10 PM »
The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets
33 Pages Posted: 28 Sep 2022

Why cross-post this particular article?

It's what trolls do.

To be fair, I think this is the exact appropriate place to cross post it. The other thread will disappear, this thread will persist, and this article will be addressed for posterity.

To be honest, I think the post in https://forum.mrmoneymustache.com/welcome-to-the-forum/did-the-great-resignation-class-of-21-22-just-pick-the-worst-time-to-retire/msg3065942/#msg3065942 was out of context.  With that said, it's odd that the link was provided there and not here!  @Must_ache needs to work on their posting etiquette...

ChpBstrd

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Re: Stop worrying about the 4% rule
« Reply #2085 on: October 04, 2022, 07:46:06 PM »
Arguably most markets across the world are now following the model developed by the US in the 20th century, and should produce similar results in the long run. Look at what's changed since 1900:

  • Europe today is more like a single federalist country. 122 years ago Europe was a bunch of constantly warring fiefdoms with feudalistic economies.
  • Places like South Korea, Brazil, India, Indonesia, Malaysia, China, Columbia, Mexico, South Africa, Japan, etc. are now capitalistic countries with stock markets, central banks, etc.
  • NONE of the world's countries use a gold standard anymore. Zero.
  • Central banks in each large economy try to influence the risk-free short term interest rate and control inflation.
  • True communism has crumbled except for a couple of holdouts like North Korea and Cuba.
  • Investors and merchants worldwide use futures and options markets to hedge against adverse events.
  • Economics is seen as a growing-the-pie game rather than a zero-sum game determined by war or slavery, as communism and feudalism assumed.
  • Compulsory education for children is the norm except in the world's poorest countries.
  • Automation has made agriculture and manufacturing smaller and smaller pieces of the world economy. Subsistence farming has gone from the norm to something that's relatively rare.
  • Women have become incorporated into the labor force, and children removed from it, in most places.

If we compare any country outside the US - India, Brazil, Indonesia, Germany, Nigeria - to where they were at various points in the 20th century, a clear trend emerges where they're all moving in the same direction, toward a similar economic and political structure. That structure is democracy and regulated capitalism. In fact, most of these countries are legally, culturally, and economically MORE similar to the modern US than the modern US is like itself from 100 years ago. The economic growth of the US in the 20th century occurred as a few millions of people in the US got out of net-zero-productivity subsistence farming and got into positive-sum industries. Our generation gets to ride the economy up as literally billions of people worldwide do the same, and as automation gets even smarter.

Even the world's totalitarian mega-states - Russia and China - have free market economies and global trade now. As Steven Pinker notes in The Better Angels of Our Nature, warfare has declined over the centuries. Most countries and individuals seem to be realizing the gains from trade and industrial specialization are greater than whatever could be gained through war, and that alone may mean the routine currency and government collapses of the 19th and 20th centuries have become rarer. Russia's failing invasion of Ukraine is a throwback to the mentality of 100 years ago, as was the US's failed colonization of Iraq and Afghanistan.

In any case, it has only become easier for people anywhere in the world to mitigate such risks by diversifying internationally. It takes merely a few touches on a glass tablet to invest worldwide, and that was never the case during the 20th century or any time before. So if the modern chances of sudden and unforeseeable currency/government/Vanguard collapse during one's retirement is, let's say, 1 in 10, then such a massive SORR event would still only demolish those people who failed to touch the screen in the right way to diversify out of that single risk. So in addition to a less risky world, we have more tools to diversity and hedge. 

Must_ache

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Re: Stop worrying about the 4% rule
« Reply #2086 on: October 05, 2022, 11:20:42 AM »
https://www.barrons.com/articles/retirement-withdrawal-strategy-4-percent-rule-51639177201

Quote
Remember that 4% rule? Inflation and lower returns means that it may be more like 3.3%—or even lower. But the better move for retirees just might be to scrap the old rule entirely and take a more dynamic approach. Rules of thumb help make an abstract and complicated process easier. The 4% rule was never meant as a one-size-fits-all solution, but with so many people endeavoring to turn their life savings into a paycheck in retirement, the rule has become entrenched in the zeitgeist. And, not surprisingly, its limitations are widely misunderstood: Based on actuarial tables and thousands of market-return scenarios, the rule determined that a heterosexual, same-age couple that retired at 65, withdrew 4% from their nest egg in the first year and then adjusted that amount for inflation every year after, had a high likelihood of not outliving their money, as long as they made no changes to that plan or their portfolio for the rest of their lives.

This is not a realistic look at retirement.

Morningstar looked at withdrawal rates for various allocation mixes that ensured a 90% chance of not running out of money over rolling 30-year periods from 1930 to 1990. An all-cash portfolio meant that retirees could safely withdraw only 1.4% to 2.5%; investing entirely in stocks allowed for a withdrawal rate of anywhere from 3.2% to 6.5%, depending on market volatility and when that volatility hits someone’s retirement. Historically speaking, taking less risk with a more balanced portfolio was the smart move: Investors were able to withdraw 3.7% to 6% with much less worry of volatility derailing their plans.

Going forward from here, though, is another story. Based on Morningstar’s research, the projected starting safe withdrawal rate for the next 30 years is 2.7% for those with money in their mattresses and 2.9% for people with everything in stocks. The highest safe withdrawal rate is 3.3% for portfolios with 40% to 60% in stocks—well below the historical “safe” withdrawal rate of 4%. But even that may be misguided. “If you retire now or soon, this fixed withdrawal rate just can’t apply to you. There is too much uncertainty about inflation and possibility of a market drop,”


There's plenty more in there, and it's not all doom and gloom.  Their assumptions might be grounded in low returns on bonds which will inevitably be some amount higher as interest rates settle.

The paper evidently exists, but I couldn't find an easy link to it - perhaps Morningstar wants you to concede some personal info to get your hands on it.  Kitces has written an article about it here:

https://www.kitces.com/blog/4-percent-rule-bengen-morningstar-report-the-state-of-retirement-income-safe-withdrawal-rates/
« Last Edit: October 05, 2022, 11:25:26 AM by Must_ache »

nereo

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Re: Stop worrying about the 4% rule
« Reply #2087 on: October 05, 2022, 12:24:10 PM »
I'm trying to puzzle out why the 4% rule applies to "a heterosexual, same-age couple that retired at 65".

I don't get what sexual orientation, marital status or the lack of an age difference has to do with the broad-brush scenarios on which a 4% WR is based.  At first I thought "SS benefits" but I don't believe that factors into it at all (other than a person retiring in, say, their 50s might start taking SS disbursements more than a decade in, thereby reducing their WR considerably - but that's not a requirement or even an assumption AFAIK).

SwordGuy

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Re: Stop worrying about the 4% rule
« Reply #2088 on: October 05, 2022, 01:30:51 PM »
I'm trying to puzzle out why the 4% rule applies to "a heterosexual, same-age couple that retired at 65".

I don't get what sexual orientation, marital status or the lack of an age difference has to do with the broad-brush scenarios on which a 4% WR is based.  At first I thought "SS benefits" but I don't believe that factors into it at all (other than a person retiring in, say, their 50s might start taking SS disbursements more than a decade in, thereby reducing their WR considerably - but that's not a requirement or even an assumption AFAIK).

Women live, on average, many years longer than men.   So, on average, a 2 woman couple would have higher expenses and a 2 man couple would need the money for fewer years. 

That's my guess.

waltworks

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Re: Stop worrying about the 4% rule
« Reply #2089 on: October 05, 2022, 01:40:16 PM »
We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

I'm confused. If I want to withdraw money for ~20 years (guesstimating the life expectancy of a 65 year old) and I get a real return on my investments of ZERO, I can still withdraw 5% per year and not quite run out of money.

There are obvious sequence of returns issues with that, of course, but it still seems basically ridiculous unless you think you'll have negative real returns most of the time.

-W

Must_ache

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Re: Stop worrying about the 4% rule
« Reply #2090 on: October 05, 2022, 02:20:28 PM »
We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

I'm confused. If I want to withdraw money for ~20 years (guesstimating the life expectancy of a 65 year old) and I get a real return on my investments of ZERO, I can still withdraw 5% per year and not quite run out of money.

There are obvious sequence of returns issues with that, of course, but it still seems basically ridiculous unless you think you'll have negative real returns most of the time.

-W

Nobody is getting a real return of ZERO this year.  Year-to-date the major stock indices are -20%, Treasuries got you 2-4%, while inflation worsened things by an additional 8.5%?   That puts the real return on the stock market closer to -27%, and -6% for treasuries. 
We've had a great run with a long bull market but I think there is a lot of air left to come out of the popping bubble.  Interest rates are still significantly lower than average and the world is crying out about the pain that will be caused by ratcheting them up further.  Sure, we've had a lot of years of generous positive returns but I don't think those will be as easy to come by for a while.
« Last Edit: October 05, 2022, 02:22:45 PM by Must_ache »

RWD

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Re: Stop worrying about the 4% rule
« Reply #2091 on: October 05, 2022, 02:24:31 PM »
We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

I'm confused. If I want to withdraw money for ~20 years (guesstimating the life expectancy of a 65 year old) and I get a real return on my investments of ZERO, I can still withdraw 5% per year and not quite run out of money.

There are obvious sequence of returns issues with that, of course, but it still seems basically ridiculous unless you think you'll have negative real returns most of the time.

-W

Nobody is getting a real return of ZERO this year.  Year-to-date the major stock indices are -20%, Treasuries got you 2-4%, while inflation worsened things by an additional 8.5%?   That puts the real return on the stock market closer to -27%, and -6% for treasuries. 
We've had a great run with a long bull market but I think there is a lot of air left to come out of the popping bubble.  Interest rates are still significantly lower than average and the world is crying out about the pain that will be caused by ratcheting them up further.  Sure, we've had a lot of years of generous positive returns but I don't think those will be as easy to come by for a while.

Real returns of the S&P 500 have never been less than 0% for periods longer than 20 years.

pecunia

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Re: Stop worrying about the 4% rule
« Reply #2092 on: October 05, 2022, 03:15:53 PM »
We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

I'm confused. If I want to withdraw money for ~20 years (guesstimating the life expectancy of a 65 year old) and I get a real return on my investments of ZERO, I can still withdraw 5% per year and not quite run out of money.

There are obvious sequence of returns issues with that, of course, but it still seems basically ridiculous unless you think you'll have negative real returns most of the time.

-W

Nobody is getting a real return of ZERO this year.  Year-to-date the major stock indices are -20%, Treasuries got you 2-4%, while inflation worsened things by an additional 8.5%?   That puts the real return on the stock market closer to -27%, and -6% for treasuries. 
We've had a great run with a long bull market but I think there is a lot of air left to come out of the popping bubble.  Interest rates are still significantly lower than average and the world is crying out about the pain that will be caused by ratcheting them up further.  Sure, we've had a lot of years of generous positive returns but I don't think those will be as easy to come by for a while.

Real returns of the S&P 500 have never been less than 0% for periods longer than 20 years.

I've read recessions last maybe a minimum of 10 months.  As was stated, there is a lot of fat to be cut this time so maybe it's a bit longer.  How long after the recession ends before stocks typically rebound?

clifp

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Re: Stop worrying about the 4% rule
« Reply #2093 on: October 05, 2022, 03:58:21 PM »


Real returns of the S&P 500 have never been less than 0% for periods longer than 20 years.
[/quote]

There are many other stock exchanges and indexes in the world, I'm sure many of them have had negative real returns over 20-year periods, which I believe is the point of the paper.

nereo

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Re: Stop worrying about the 4% rule
« Reply #2094 on: October 05, 2022, 04:42:32 PM »


Real returns of the S&P 500 have never been less than 0% for periods longer than 20 years.

There are many other stock exchanges and indexes in the world, I'm sure many of them have had negative real returns over 20-year periods, which I believe is the point of the paper.
[/quote]
Most exchanges aren’t relevant comparisons. The SP500 is the benchmark precisely because it such an enormous slice of the global market. Very few others even reach a tenths of its breadth (without incorporating many of the SP’s companies in the mix) and those come close typically lack the century+ history and/or the free-and-fair(ish) market parameters (eg China)


clifp

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Re: Stop worrying about the 4% rule
« Reply #2095 on: October 05, 2022, 07:59:37 PM »
Looks like the S&P accounts for about 25% of the global stock market capitalization and the total US stock market accounts for about 1/2 of the world.  I won't call 25% enormous, but certainly significant.  Data is about a year old so doesn't reflect the 2022 bear market.

waltworks

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Re: Stop worrying about the 4% rule
« Reply #2096 on: October 05, 2022, 08:18:50 PM »
We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5% chance of financial ruin can withdraw just 2.26% per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

I'm confused. If I want to withdraw money for ~20 years (guesstimating the life expectancy of a 65 year old) and I get a real return on my investments of ZERO, I can still withdraw 5% per year and not quite run out of money.

There are obvious sequence of returns issues with that, of course, but it still seems basically ridiculous unless you think you'll have negative real returns most of the time.

-W

Nobody is getting a real return of ZERO this year.  Year-to-date the major stock indices are -20%, Treasuries got you 2-4%, while inflation worsened things by an additional 8.5%?   That puts the real return on the stock market closer to -27%, and -6% for treasuries. 
We've had a great run with a long bull market but I think there is a lot of air left to come out of the popping bubble.  Interest rates are still significantly lower than average and the world is crying out about the pain that will be caused by ratcheting them up further.  Sure, we've had a lot of years of generous positive returns but I don't think those will be as easy to come by for a while.

I think you missed my point. Over 20 years, if you expect zero real returns, you'd still be able to withdraw much more than 2.2% or whatever per year. You'll have good and bad years (and sequence of return risks to match) but if you're that worried about running out of money that fast, all you really need is to protect yourself from inflation, you don't need volatile/risky/high return assets like stocks at all.

-W

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Re: Stop worrying about the 4% rule
« Reply #2097 on: October 05, 2022, 10:07:11 PM »
Looks like the S&P accounts for about 25% of the global stock market capitalization and the total US stock market accounts for about 1/2 of the world.  I won't call 25% enormous, but certainly significant.  Data is about a year old so doesn't reflect the 2022 bear market.
I don't know about these numbers - isn't the S&P 500 more like 75-80% of the US market (here), and the US is 62% of the world market (here, slide 62), so the S&P is at just below half of global publicly traded stock?

clifp

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Re: Stop worrying about the 4% rule
« Reply #2098 on: October 05, 2022, 10:31:38 PM »
S&P 500 Market Cap is at a current level of 31.90T, down from 38.29T last month and down from 36.32T one year ago. Accurate today
https://www.slickcharts.com/sp500/marketcap#:~:text=The%20S%26P%20500%20has%20a,the%20outstanding%20float%20share%20count.


The total market capitalization of the U.S. stock market is currently $48,264,353.4 million (March 31st, 2022) different date. but doesn't include the CBOE, or AMEX.
https://siblisresearch.com/data/us-stock-market-value/

 This statistic presents the global domestic equity market capitalization worldwide from 2013 to June 2022. The value of global domestic equity market increased from 65.04 trillion U.S. dollars in 2013 to121.94 trillion U.S. dollars in 2021. As of June 2022, the total market capitalization of domestic companies listed on stock exchanges worldwide recorded as 105.07 trillion U.S. dollars.
https://www.statista.com/statistics/274490/global-value-of-share-holdings-since-2000/

To be fair there are many estimate of the market cap of the world stocks, and with different dates it is hard to compare.

PDXTabs

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Re: Stop worrying about the 4% rule
« Reply #2099 on: October 06, 2022, 12:41:38 AM »
Looks like the S&P accounts for about 25% of the global stock market capitalization and the total US stock market accounts for about 1/2 of the world.  I won't call 25% enormous, but certainly significant.  Data is about a year old so doesn't reflect the 2022 bear market.
I don't know about these numbers - isn't the S&P 500 more like 75-80% of the US market (here), and the US is 62% of the world market (here, slide 62), so the S&P is at just below half of global publicly traded stock?

I usually check VT to see the US market cap vs RoW because it tracks the FTSE Global All Cap Index. VT is currently 60.5% US. But there is a catch: the FTSE Global All Cap Index doesn't actually track all countries. In particular it doesn't include "frontier markets" or "unclassified markets" so it misses places like Ukraine, Iceland, Belize, Ecuador, Lithuania, Latvia, Estonia, etc.

 

Wow, a phone plan for fifteen bucks!