Stop worrying about the 4% rule

[maizefolk]

I posted the source code I used to rule the calculations in make the charts in my signature, but I don't know if anyone else has gotten it working or not (if not it says more about my poor documentation than anything else), so I ran some of the scenarios you mentioned myself. If you feel up to getting the code working, I've added in the option to experiment with different percentages of your portfolio allocated to stocks, bonds, and cash.

5% WR, starting at age 45.



Risk of bankruptcy before death was 15.5%

4% WR, starting at age 50.



Risk of bankruptcy before death was 2.4%.

At that point there's already basically no visible red left, but if I raised the starting age to 55 and kept the WR at 4% the risk of bankruptcy before death dropped to 1.6%

[Le Barbu]

I posted the source code I used to rule the calculations in make the charts in my signature, but I don't know if anyone else has gotten it working or not (if not it says more about my poor documentation than anything else), so I ran some of the scenarios you mentioned myself. If you feel up to getting the code working, I've added in the option to experiment with different percentages of your portfolio allocated to stocks, bonds, and cash.

5% WR, starting at age 45.



Risk of bankruptcy before death was 2.4%.

At that point there's already basically no visible red left, but if I raised the starting age to 55 and kept the WR at 4% the risk of bankruptcy before death dropped to 1.6%

Thank you so much! I will try to run the experiment version but the 2 graphs above are amaising.

I am 45 now, fairly well paid but with not so much options to come back into business when I quit. My expenses actually represent 5-6% of portfolio on average. So maybe another 5MY worth but 10MY would be an upfront fail as Arebelspy already mentioned.

[DavidAnnArbor]

Great graphs Maizeman

[waltworks]

1: This isn't an active vs. passive investing thread.
2: Oh, just go to cash when things crash and get back in when they're significantly lower? My god! Why didn't I think of that?

Derp. Go throw your own money away trying to do that if you want to, you'll certainly stand a nice high chance of FIRE failure that way, 4% SWR or otherwise.

-W

[dividendman]

1: This isn't an active vs. passive investing thread.

It also isn't a thread where someone unilaterally decides whether it's an active vs passive investing thread.

Well, you're correct if by unilateral you mean the person who created the thread. The 4% rule is based on a passive index approach, hence the conversation is around that and why it's a feasible rate of withdrawal.

With active investing, you could have a SWR of 100% per year if you're good (lucky) enough.

[waltworks]

1: This isn't an active vs. passive investing thread.

It also isn't a thread where someone unilaterally decides whether it's an active vs passive investing thread.

Well, I could try to get everyone to talk about golf, or investing in gold, or GOT, or post endless cute cat pictures, but that would presumably annoy the people who are trying to discuss/learn about the 4% rule, right? Which is based on *market returns* rather than beating/not beating said returns via clever/lucky/disastrous investing. If I go to Vegas every year and turn my remaining $1000 of savings into a million bucks at the slot machines, I don't start talking about how the 4% rule doesn't apply to me.

Because that would be stupid, since I'm talking about something irrelevant to the discussion.

-W

[Tyson]

Well, I could try to get everyone to talk about golf, or investing in gold, or GOT, or post endless cute cat pictures, but that would presumably annoy the people who are trying to discuss/learn about the 4% rule, right? Which is based on *market returns* rather than beating/not beating said returns via clever/lucky/disastrous investing. If I go to Vegas every year and turn my remaining $1000 of savings into a million bucks at the slot machines, I don't start talking about how the 4% rule doesn't apply to me.

Because that would be stupid, since I'm talking about something irrelevant to the discussion.

-W

I'm not advocating gambling.  I'm advocating that we not pretend that the market, at high as it is right now, will actually realize the historical market returns that the 4% rule blindly assumes.

I don't think that's true, that we're in for lower returns.  But even if it were, what is you alternative?  3%, 2%?  Never retire?

[markbike528CBX]

The 4% rule (per Trinity study and others) is "designed" to fail 5% of the time (95% success).   
It does NOT assume 100% certain, locked in success.   It does NOT blindly assume (mean, average) historical market returns, it fails only in worst case scenarios.

Sure the 4% rule might fail in the future for 5% of the scenarios.   

Do we know now that FIREing now will be certain of failure. No.

We (runewell et al) might suspect it.   

With any sort of flexibility (lowering withdrawals a bit or even simply not incrementing withdrawals for inflation), one can mitigate those risks.

Some comments are foamy.  So be it.  Black foam box or Orange foam box (from the Overheard at Work thread page 200 or so).

[sol]

I'm advocating that we not pretend that the market, at high as it is right now, will actually realize the historical market returns that the 4% rule blindly assumes.

I'm advocating that the market WILL.  I will literally wager a million dollars that a 4% SWR will survive for 30 years, on the exact day I retire.  I have no hesitation about this bet.

But you're not an aspiring early retiree, and you don't believe in (or even understand, apparently) the historical analysis this decision is based on.  In fact, I'm not even sure why you're here.

Please go away.  Work just as long as you like.  Bet against the stock market all you like.  Wallow in pessimism and doom as much as you like.  Just stop doing it here.

Because frankly I'm sick and tired of all these folks showing up in carefully researched and referenced threads they have not read and loudly shouting the opposite conclusion without any evidence, forethought, or credibility.  You degrade the quality of this conversation and you look like an ignorant rube.  Just read the thread already, and you'll see that all of your questions and naive criticisms have already been answered thoughtfully by caring people with professional expertise.

But we all know I'm fooling myself.  You won't read it.  You don't want real answers because you're not asking real questions.  You're regurgitating cable show talking points without any understanding of context or motivation.  You've been duped, and it shows.  Your consistent and total refusal to accept the education offered to you here is, I suppose, a clear explanation as to why you were so easily duped in the first place, so maybe I shouldn't be surprised.

So to reiterate: please go somewhere else.  The internet is full of forums targeted at people just like you, places where you will be welcomed with open arms.  Here, you do not fit in.  Here, you are obviously out of place, a single black rose in a field of yellow daylilies.  Go away, and leave us in peace to spread our message of hope and optimism to others eager to escape their 9-5 treadmill of oppression and despair.  You are clearly happy with that life, but it has no place here and neither do you.

[Tyson]

I don't think that's true, that we're in for lower returns.  But even if it were, what is you alternative?  3%, 2%?  Never retire?

Have you considered there might be numbers between 3% and 4%? 
And that the safe withdrawal rate might change over time?

Have you considered reading the rest of this thread, where these very ideas have been discussed already?

[dividendman]

I don't think that's true, that we're in for lower returns.  But even if it were, what is you alternative?  3%, 2%?  Never retire?

Have you considered there might be numbers between 3% and 4%? 
And that the safe withdrawal rate might change over time?

Have you considered reading the rest of this thread, where these very ideas have been discussed already?

On top of that, runewell, what is your actual position assuming the goal of retiring early and/or having financial independence?

You think the 4% rule isn't sufficient. So, what is your position? How are you going about achieving FIRE?

If you're not interested in FIRE or think it cannot be achieved then I agree with Sol that you've come to the wrong place.

[runewell]

On top of that, runewell, what is your actual position assuming the goal of retiring early and/or having financial independence?

You think the 4% rule isn't sufficient. So, what is your position? How are you going about achieving FIRE?

If you're not interested in FIRE or think it cannot be achieved then I agree with Sol that you've come to the wrong place.

I currently have about 10x-15x of expenses saved up.  If I wanted to aggressively retire early and scrape by, I could probably do that in 6-10 years.
But, I might prefer to provide more to my kids and to charity, so I probably won't retire for 13-20 years.
It's pointless to narrow these ranges down until the ideal date approaches since there are so many unknowns.

I think that IF you use the 4% study as a STARTING POINT, you should be more pessimistic since current market valuations and higher than historical, that's all.  I can't understand why that statement generates so much fury.   

[sol]

I'm here to stay, and there's no way you're going to bully me to leave. 

I still think you're an ignorant troll, but I admire your perseverance.  Maybe if you stick around long enough, you'll actually read this thread and learn something.  C'mon, I know you have it in you.

I think diversity of opinion is important, and if you disagree than I guess I look forward to irritating you. 

You are not expressing diversity of opinion, you are contradicting pages and pages of mathematical analysis without offering any evidence at all, and it makes you look silly.

And you're doing so with such undeserved conviction that I fear new readers will come here, read your silly nonsense and not the overwhelming bulk of evidence presented in this thread, and become confused.  You have single handedly destroyed this previously helpful thread, by tacking on a bunch of idiotic contradictory drivel at the end.  What used to be a citable resource for new people like you has instead become just another Fox news style "fair and balanced" discussion where one side just makes stuff up and the preponderance of evidence and logic is totally overruled by being presented side by side with nonsensical deceptive lies.

You are quite arrogant, aren't you?

Yes, very.  Part of it is my natural personality deficiencies, but part of it is too many years of education and too many words contributed to this forum arguing with dummies.

But I'm not the only one, now am I?  Why are you so arrogant as to think your totally unresearched criticisms haven't already been addressed in this very thread, that you still refuse to read?  What gives you the authority to so confidently dispute the conclusions of all of the smart folks who have contributed to this discussion before you?

Seriously dude, just go read the thread already.  Your eyes will be opened, and you can either quit revisiting old questions or move on to some new ones.

[tooqk4u22]

I'm definitely not furious. Ok cool, your opinion has been stated many many times. Now what? What do we do with that opinion?

To be fair, opinions are like assholes....everyone has one and because of that opinions don't carry much value....you could quite possibly use one to wipe the other. 

My opinion is that I am the fairest one of all....mirror mirror do thou agree.  However when I asked that I got a different opinion (based more on facts).   The mirror replied "In the land of the ugly the fairest you shall be"  G'damn facts messing with my opinions!

[Clean Shaven]

This blog has been discussed on MMM forum (and within this very thread, around post #554), but this guy argues that 4% isn't safe enough when extrapolated out beyond 30 years, and argues for something more like 3.5% for longer periods like 40-50 year retirements:

https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/

Prior MMM thread (see post #13 and onward):
https://forum.mrmoneymustache.com/post-fire/a-swr-fort-today/?nowap

Personally, I'm using 4% as a general rule, with some flexibility planned into it.  My wife and I are actually going to semi-FIRE next spring at around a 4.5% WR, with several flexibility factors that will change the actual WR lower:  (1) she's going to stay working on a very P/T basis for another year or two, (2) we'll both get Soc Sec (she could collect as early as 9 years from now -- we're not as young as many here), (3) our WR provides for a good margin of fluff on which we can scale back if the market tanks, (4) we will sell our house in another 10-15 years and extract a good chunk of equity, (5) if the market severely tanks in the first 5 years of FIRE, or I get bored, I'll go back to work, and finally, (6) I'll get an inheritance of some amount -- possibly well into 6 figures -- though we aren't planning on this at all as part of the #s.

[Tyson]

On top of that, runewell, what is your actual position assuming the goal of retiring early and/or having financial independence?

You think the 4% rule isn't sufficient. So, what is your position? How are you going about achieving FIRE?

If you're not interested in FIRE or think it cannot be achieved then I agree with Sol that you've come to the wrong place.

I currently have about 10x-15x of expenses saved up.  If I wanted to aggressively retire early and scrape by, I could probably do that in 6-10 years.
But, I might prefer to provide more to my kids and to charity, so I probably won't retire for 13-20 years.
It's pointless to narrow these ranges down until the ideal date approaches since there are so many unknowns.

I think that IF you use the 4% study as a STARTING POINT, you should be more pessimistic since current market valuations and higher than historical, that's all.  I can't understand why that statement generates so much fury.   

Please read the very first post of this thread.  It indeed talks about the 4% rule being a starting point, and that there are other safety measures.  FIRST POST!

But of course, your real issue is fear.  Fear that 4% won't be enough.  Fear that the market is overvalued.  That's your core belief, and no amount of math or logic will change that for you.  But that's fine.  If you're happier with a 3.5% withdrawal rate, have at it.  It's your life. 

I should also point out that if you are at least 10 years away from retirement, as you state, then things like CAPE are irrelevant to you.  During accumulation you shouldn't care one way or another about any of that - just keep socking money away and see where things stand as you get closer to you end point.  Seriously, I thought you were are lot closer to FIRE.  Most of your posts are sort of pointless in view of your time horizon.

[tooqk4u22]

I currently have about 10x-15x of expenses saved up.  If I wanted to aggressively retire early and scrape by, I could probably do that in 6-10 years.
But, I might prefer to provide more to my kids and to charity, so I probably won't retire for 13-20 years.
It's pointless to narrow these ranges down until the ideal date approaches since there are so many unknowns.

I should also point out that if you are at least 10 years away from retirement, as you state, then things like CAPE are irrelevant to you.  During accumulation you shouldn't care one way or another about any of that - just keep socking money away and see where things stand as you get closer to you end point.  Seriously, I thought you were are lot closer to FIRE.  Most of your posts are sort of pointless in view of your time horizon.

And possibly not for 20 years - I get the CAPE argument if you are close to pulling the trigger but not so much if 10-20 years.  There is no denying that when markets are more highly valued there is more risk to the downside but that doesn't invalidate the 4% rule and doesn't mean markets will go down or earnings won't grow into the valuations.

[Tyson]

Sigh.  Yes all history backs up the idea that the 4% rule is safe.   

The Trinity Study itself shows that the 4% rule is not completely safe. 

Like I said in a previous post, you're main problem is fear.  CAPE is just an excuse to indulge that fear.  If it wasn't CAPE, it'd be some other measure that allows you to wrap your emotional reasoning within the illusion of logic.

Actually I think it is you that is afraid.  Fear that modern research will debunk the 4% rule and threaten early retirement.

Nothing is completely safe, ever.  The 4% rule fails about 5% of the time.  Which means it has a 95% success rate.  That's an overwhelming success rate.  But even then, there's more you can do to bolster it, such as flexible spending in retirement, etc... 

I didn't start seriously saving until a few years ago, so I might RE but not by much :) 

And re: modern research.  Riddle me this, Batman.  Why is it that "modern research" ALWAYS weights toward things being worse in the future than in the past?  I've never, ever seen any analysis that says "Hey, the future is different than the past, and it's BETTER!  Hello 6% withdrawal".

No, the research is always doom and gloom.  "The future is different from the past, and it's WORSE.  Hello 3% (or 2%) withdrawal."  It'd be funny if it weren't so tragic.

[steveo]

I think the future could be significantly better than the past. I think the world is generally safer (excluding terrorism) and there are a bunch of countries (China and India are the big ones) expanding economically which I think will continue. We also aren't living in a pro inflationary environment at this point.

It's guesswork but I think we may end up with less bad periods that what we've had in the past 100 years.

[matchewed]

Sigh.  Yes all history backs up the idea that the 4% rule is safe.   

The Trinity Study itself shows that the 4% rule is not completely safe. 

Like I said in a previous post, you're main problem is fear.  CAPE is just an excuse to indulge that fear.  If it wasn't CAPE, it'd be some other measure that allows you to wrap your emotional reasoning within the illusion of logic.

Actually I think it is you that is afraid.  Fear that modern research will debunk the 4% rule and threaten early retirement.

Nothing is completely safe, ever.  The 4% rule fails about 5% of the time.  Which means it has a 95% success rate.  That's an overwhelming success rate.  But even then, there's more you can do to bolster it, such as flexible spending in retirement, etc... 

I didn't start seriously saving until a few years ago, so I might RE but not by much :) 

And re: modern research.  Riddle me this, Batman.  Why is it that "modern research" ALWAYS weights toward things being worse in the future than in the past?  I've never, ever seen any analysis that says "Hey, the future is different than the past, and it's BETTER!  Hello 6% withdrawal".

No, the research is always doom and gloom.  "The future is different from the past, and it's WORSE.  Hello 3% (or 2%) withdrawal."  It'd be funny if it weren't so tragic.

You can't sell "well things are probably going to be just fine". :)

[Clean Shaven]

You can't sell "well things are probably going to be just fine". :)

Sure you can!

http://www.billboard.com/artist/294987/bobby-mcferrin/chart?sort=timeon&f=379

26 weeks on the Billboard charts.

[matchewed]

You can't sell "well things are probably going to be just fine". :)

Sure you can!

http://www.billboard.com/artist/294987/bobby-mcferrin/chart?sort=timeon&f=379

26 weeks on the Billboard charts.

The Billboard charts started in July of 1940. That's about 4022 weeks.

.65% of the Billboard charts is Bobby Mcferrin.

Pink Floyd's Dark Side of the Moon spent 861 weeks on the Billboard.   21%

:D

[TomTX]

I still think you're an ignorant troll, but I admire your perseverance.  Maybe if you stick around long enough, you'll actually read this thread and learn something. 

Maybe I have read the entire thread and still believe that I have something meaningful to contribute.  Besides, I can't remember everything that has been said on this forum.

"Maybe" means you haven't actually read it.

Nothing but a fear troll.

[maizefolk]

Actually I think it is you that is afraid.  Fear that modern research will debunk the 4% rule and threaten early retirement.

Runewell, as some others have commented above, it's not clear what your motivation in this discussion is. It is very clear that you don't like the 4% rule, as you've used very charged language to try to disparage it for as long as I've seen you be active in various SWR threads. I don't really understand why it carries so much emotional weight for you given that, as you point out, you're decades away from having to make decisions about your own spending plans for retirement. But let's put that aside. Maybe a vocal advocate for the 4% rule ran over your dog, or stole your spouse, or something.

If you really thing there is evidence that falsifies the 4% rule, put it out there. We've already been over the previous study you brought up and the problems with how they are using CAPE ratios and how other evidence suggests that the market may be somewhat overvalued right now but not nearly to the same extreme level suggested by CAPE. We've gone over the fact that the 4% rule doesn't assume average market returns, but in fact assumes some of the worst returns that have ever been seen. We've been over the fact that despite retiring in an extremely overvalued market even the 2000 FIRE retiree doesn't appear to be in too much trouble 17 years in.

Is there other evidence or are there studies you think "debunk" the 4% rule that you'd like to bring up for discussion? Or are there other points you've made previously that you feel debunk the 4% rule that I've missed in my summary above?

In addition, would you be willing to briefly summarize what would you like people to be doing differently as a result of your posts? Do you, for example, want everyone to save up enough money that they can live on only 3.5% of their savings (or some other number)?
Or move most of their stocks to international index funds?
Or just not FIRE until either profit growth or a market correction brings the market to a valuation that you don't think in overvalued?
Or something else entirely?

[Clean Shaven]

Maybe a vocal advocate for the 4% rule ran over your dog

^^^ Plot of 2018 summer blockbuster John Wick 3?

[secondcor521]

DFTT.

[markbike528CBX]

.... big snip.....
. Maybe a vocal advocate for the 4% rule ran over your dog, or stole your spouse, or something.
.....snip....

And if the 4% rule doesn't work out for maizeman, I see a bright future for him as a country song writer. :-)

[cerat0n1a]

over the last 72 years the only time this metric was higher was 1965-1972 and 1997-2001 and both those periods went on to experience lower than average market returns.

1965 and 1966 were two of the four years when a 4% withdrawal rate left a portfolio which was smaller after thirty years than it was at the start. Nevertheless, the 4% rule did not fail for retirees between 1965 and 1972 and doesn't currently look likely to for 1997-2001 either.

[Le Barbu]

Considering the actual CAPE, p/e, p/b, public and personal debt, political instability, energy scarcity, global warming, pollution, markets could tank 80% for 2 years in a row anytime soon. This makes the 4% rule provide only 1 year of living!

Unless some smart people already figured out some of these issues and actual pricing is not out of wack that much?

[waltworks]

Did it occur to you that trying to further reduce risk below what the 4% rule offers will generally *greatly decrease* your time retired?

As Arebelspy once noted, if you hold out forever for  1% SWR, your retirement has already failed - because you didn't take it.

-W

[Le Barbu]

Some of the best shit ever typed by MMM was posted years before he became famous. Back in time, hooked readers use to go through every single post within few days. Comparing registration date vs comments and general attitude, I suspect that the newer crowd dont do this anymore...

As an exemple below, this is a post written in early 2014 wich title could have been "Stop worrying about the 4% rule". Whenever I feel insecure about money (job loss 1 year ago, urge feeling to repay mortgage, etc) I read this again and feel better.

"Give Yourself the Gift of Not Worrying About Money"

We are already masters at reducing expenses and investing. Why are we so anxious while the other 99% of population who sucks with money dont give a fuck and still manage to live their life anyway?

[Tyson]

Sigh, can we just concede to runewell that 3.5% is safer than 4% and maybe then he'll shut up and go away?

[waltworks]

Well, it's probably not "safer" if your goal is to maximize non-working lifetime.

It's "safer" if your goal is to never run out of money. But that's a different goal than maximizing your enjoyment of life.

-W

[Le Barbu]

As stated back in february 2013:

The “internet retirement police” (IRP), which you’ll meet in various online forums, have established five main directives:
In principle you can only participate in certain pre-approved retirement activities such as beach-sitting, staring out the window, and receiving visits from your grandchildren.

Traveling is also okay, as is eating “delicious food”, just make sure you don’t cook it yourself, see below. Think twice before doing anything that’s not on this list! The IRP is watching you.

The IRP does grant one exemption should you become bored with the activities above. You can work for a nonprofit organization. Make sure you’re not getting paid though even if you have to plead your case with the CEO to put in special exemptions. Accepting money obviously means you didn’t do your retirement-math and that you ran out of money a couple of years after retiring. After all, what other obvious explanation could there be? (Besides the obvious ones) If you can’t find a way to work without pay, it’s best to head back to the beach towel and sit on that.

Just to be clear: You’re most definitely NOT allowed to be a kayak-instructor in your retirement. While it may sound like a fun job that you picked yourself even if you didn’t have to, the keyword is J-O-B. You can, however, spend a Saturday morning dressed up as an elephant handing out fliers and free lemonade at the entrance. And if you really must instruct in kayaking, please avoid doing something more engaging than blogging about kayaks (and if you do blog, try not to make the blog popular… because … then the blog would be a job!).

Next, I feel like I should warn MMM readers lest they stumble into the retirement pitfall of saving money by living frugally. You can’t do that! According to the IRP saving money IS a full time job and—try to follow this—since you can’t have a job and be retired, you are not allowed to save money in retirement. You see, if you save money by doing your own cooking, you’re now WORKING as a cook, thus no longer retired.

The IRP would like you to take this to its extreme logical conclusions, e.g. you’re working as a money manager if you handle your own investments, you’re working as a gardener if you mow your own lawn, you’re working as a chauffeur if you don’t hire a driver, you’re a pro-blogger if you have a blog, and so on.

Disclaimer: All examples are taken from real world cases as presented to me by the IRP. They’re not kidding!

[Tyson]

runewell, your stance is basically to trot out a figure (CAPE) that may or may not predict the future, use it to say "the future will be much, much worse than the past" and then say "prove that it won't".  It's not up to us to prove that it won't.  It's up to you to prove that it will.  Correlation and speculation aren't proof.  Till you have something substantive to add, I'm done with you.

And no, you don't 'win' because I stopped engaging with you.

You didn't stop engaging, otherwise you wouldn't have written this.

The 4% rule doesn't prove anything either.  It also tries to guess at what future returns are.  If you can't admit the CAPE, you can't have the 4% rule either.

OK fine, I'll respond.  4% rule says the future won't be worse than the worst times in the history of the stock market.  You're saying it will be worse because of CAPE.  Prove it.

[matchewed]

OK fine, I'll respond.  4% rule says the future won't be worse than the worst times in the history of the stock market. 

Prove it.

Because the rule is based on the past that is the inherent assumption. The statement is just stating that assumption.

You seem to be saying that assumption is false because of CAPE.

You're just being asked to provide evidence of that.

So your counter is to ask for evidence that the 4% rule uses past data as an assumption?

/bogle

[Tyson]

OK fine, I'll respond.  4% rule says the future won't be worse than the worst times in the history of the stock market. 

Prove it.

Look at the data and all of history.  The assumption of the 4% rule is that the future won't be worse than that. 

Now, if I came in here and said "Wait, the future is gonna be WAY BETTER than the past and we can all start doing a 6% withdrawal", no one would believe me and it would be up to me to prove that 6% was actually correct. 

Same thing going the other way.  You say the future withdrawal rate should be less than 4%.  Prove it.

But I suspect you won't even try - I think you're more vested in trying to win the argument rather than get at the truth.  I started to suspect it back when it was pointed out to you that CAPE was only mildly elevated, taking in to considerations the modern changes in accounting rules.  An at no point is a mildly elevated CAPE even semi-associated with poor sequence of returns. 

That's not even bringing up the fact that NO ONE here is advocating robotic 4% withdrawal regardless of market conditions.  We talk a lot about flexibility in retirement as a hedge against poor sequence of returns, especially during the first decade when portfolios are the most vulnerable. 

So, either you haven't read, don't care, or don't understand these things.  I'm not sure which.  But you keep posting the same things over and over and over and over again, and it seems like nothing will change your mind, because you don't want to change your mind. 

Or, put another way, what would convince you that the 4% rule is safe?  I'll hazard a guess and say your answer is "nothing".

[Le Barbu]

Being 45yo now, I started few years ago to show up quite regularly at relatives funerals. Many of them died in their 60s (FIL @ 64, mother's cousin @ 66, etc) the later being one of my sweetest aunt who just turned 60yo and never retired. She was eating well, do not drink alcool, not overweigth etc but got cancer anyway. Changed my mindset about ER and SWR. Death is for real and this is what stats are made of. Why in Hell one choose to bother challenging a rule of thumb called "the 4% rule" while most of our relatives enjoy retirement for <10 years on average?

[sol]

If your horizon is instead 40-50 years Now you need a 2.0%-2.5% SWR. 

You are (acting like) an idiot who keeps repeating the same idiotic claim despite it being disproven to you over and over again.

I'll just quietly reiterate that a 3% SWR of an ordinary US asset allocation has never failed, for any length of time.  Not during global wars, the great depression, stagflation, currency crises, oil embargoes, real estate bubbles popping, savings and loan scandals, stupid presidents with counterproductive foreign policies, crippling natural disasters, none of it has ever caused an inflation adjusted 3% to fail.  Not over 30 years or 100 years.

If you're shooting for anything under 3%, then you are basically betting that America is over.  You think our future will be significantly worse than our worst times ever?

[matchewed]

4% rule says the future won't be worse than the worst times in the history of the stock market. 

This is indeed a weakness of the 4% rule, it is possible that worse 30-yr stock market outcomes might occur. 

A problem with the 4% rule is that it also says that the distribution of future 30-yr sequences will match the distribution of 30-yr sequences from the last 100-or-so years.  With no account for whether the market is priced low or high when the person retires.

Um isn't that accounted for? In the past a person retired when the market was low or high.

[Tyson]

I think that the ideal starting SWR could be anywhere between 3.25%-4.75% depending on a multitude of factors, many of which I can't know about until retirement is closer.

I said something along these lines several pages ago to you.  These are things you don't even have to begin to worry about until you are much closer to retirement. 

I also said, many, many times - if you're more comfortable with 3.5 (or 3.25) then go for it.  No one is stopping you. 

[sol]

I think that the ideal starting SWR could be anywhere between 3.25%-4.75%

Great, then please stop writing things like "you need a 2% SWR".  You're only confusing the good people who come here looking for advice, by providing bad advice without context.

And you just keep doing it over and over again.  Please stop, you look like a troll.

[Tyson]

I said something along these lines several pages ago to you.  These are things you don't even have to begin to worry about until you are much closer to retirement. 

I also said, many, many times - if you're more comfortable with 3.5 (or 3.25) then go for it.  No one is stopping you.

Good.  I have a spreadsheet at home that forecasts my investments.  It assumes a 6% return until I retire and a 4% SWR.  If I wait until 60, I will probably have $2M.
But, 6% is probably not likely in the next ten years.  The % of equity allocation graph I showed earlier predicts 4%, and the CAPE method predicts even less (although if we go with the fact that CAPE might be a bit exaggerated, it might get closer to 4%).

If I go on assuming 6% forever, that might be too optimistic.  I think things will be fine, and then returns sputter between 2017-2025 and now my retirement is delayed.  Maybe it's better to plug in 4% and assume a lesser, later retirement until market conditions tell me otherwise.

This isn't stuff that needs to be ignored until six months before retirement.

Historical return is over 9%, assuming you re-invest dividends.  If you assume a long term 6% return then that is already really, really low.  I think 6% is going to be very easy to hit going forward because it's already way below historical returns.

[MDM]

runewell,
I ask again, what would it take to change your mind on this topic? 

I don't understand why you want to change my mind.

Willingness to change one's own mind when presented with appropriate information is a good thing.  Refusal to consider changing one's own mind, regardless of information, is not a good thing - agreed?

Another way of stating this is "There is no point in  making hypotheses that are not  falsifiable, because such hypotheses do  not say anything."

What is your hypothesis, and what information would falsify it?

[MDM]

Another way of stating this is "There is no point in  making hypotheses that are not  falsifiable, because such hypotheses do  not say anything."

What is your hypothesis, and what information would falsify it?

Maybe you guys could weigh in on my suggestions before eliminating them.  Up to this point nobody has made it clear that they even comprehend my point, which is probably why they are being ignored.  Everyone keeps on saying "The 4% rule accounts for it" but they don't even know what it is.

Not trying to eliminate your suggestions, just trying to understand them.

What is your hypothesis (or suggestions), and what information would falsify it (or them)?

[matchewed]

So your premise is in fact that we are in overvalued territory therefore you may only compare potential success against other overvalued historical times.

Yes.  How overvalued we are now vs then is a tricky question.

Okay, how do you come to the conclusion that we are in overvalued territory? Is it using CAPE? Just other people's say so?

CAPE and normal P/E are one metric, P/B is another.  % of total equity allocation is another.  There are problem plenty others out there I haven't looked for yet. but go up a few posts where I enumerated some concerns and start there.

So you posted the Vanguard paper earlier as evidence that CAPE is predictive and therefore the 4% rule is questionable when the paper concludes that at best CAPE is only predictive of 40% of the variance and even utilizing such predictions Vanguard concluded that the future returns may well be in line with historical returns within a probablistic framework. Given this why do you deviate from that end conclusion? Why is this time different?

[DavidAnnArbor]

I feel like there's an effort to try to predict the future with the claim that CAPE or other metrics are high and therefore future stock returns are going to be lower.

I think predictions are just that, predictions.

Here's what some economists are predicting.

The weak dollar, the recovery in Europe, and really good corporate earnings is propelling the market right now.

But there is not a lot of confidence in the market right now. So it's possible we'll have a market correction that has nothing to do with corporate profits.

Jeremy Siegel predicts a 7% nominal rate of return of the stock market over the next several years (2% inflation built into that).

Robert Shiller agrees the market is highly valued right now.

http://www.wbur.org/onpoint/2017/08/03/where-the-booming-stock-market-goes-from-here

[TomTX]

If you are able to find a government backed inflation linked bond with a 0% real return, a 4% WR gets you 25 years, by definition. As it happens, you can go out right now and buy US treasury 30-year TIPs which give a real return of 0.98% and that will let you have a withdrawal rate of 4% for 30 years in absolute safety. You don't need to worry about CAPE or stock market volatility or any of that. Not for me - but it shows how very conservative a 4% WR over 30 years actually is.

But how do you know you need exactly 30 years?  You don't.
If you live the MMM dream and retire at 40, your life expectancy is about 40 years.  That's just the mean, you could very well outlive that.  If the retirement period were a set amount of years I would agree with you and we wouldn't have a thread named Stop worrying about the 4% rule.  If your horizon is instead 40-50 years Now you need a 2.0%-2.5% SWR.  Or equities and volatility.

So, why exactly are you here?

White Knighting us poor deluded believers in the 4% rule? While refusing to actually read the background material on the site?

[TomTX]

4% rule says the future won't be worse than the worst times in the history of the stock market. 

This is indeed a weakness of the 4% rule, it is possible that worse 30-yr stock market outcomes might occur. 

A problem with the 4% rule is that it also says that the distribution of future 30-yr sequences will match the distribution of 30-yr sequences from the last 100-or-so years.  With no account for whether the market is priced low or high when the person retires.

Why do you keep mis-stating the 4% rule?

Is it because your own position is so weak that it basically doesn't really exist?

[TomTX]

runewell,
I ask again, what would it take to change your mind on this topic? 

I don't understand why you want to change my mind.

I just want you to stop regurgitating your own crap that was already disproven.