What is an ultra-conservative SWR?

[FastStache]

I'm one of those that would like to FIRE for good when I choose to do so. I think it is more efficient to keep the money growing than to leave and then realize you need more to get by. I'd rather work an extra year or two to get to that point then worrying about drawing down at 4%.

What is an extremely safe SWR? 2%? 3%? 3.3%? I would say a very safe rate is one that has 100% success given any 30 year period and then a safety buffer on top of that.

[Bob W]

I believe you have answered your own question?


There are many variables to look at.   Your age?   Will you have a pension?   Married?  Similar data for spouse?  Total assets?    Will you reduce your COL significantly after FIRE.      Will you be investing in real estate?  Will there be SSI?   House paid off?   

Lot's of variables.   But IMHO if you think you need to work and extra year, go for it.   Life after RE isn't all roses and champagne any how. 

[FI40]

Whatever the average yield is on a basket of TIPS. I'd say that's pretty safe. Unnecessarily so.

Realistically your safety comes as much from being flexible with spending and having the ability to earn income in retirement as it does with your withdrawal rate.

[deborah]

0.7% - the Japanese SWR - this is the worst country SWR that has been calculated. On the assumption that any country can change.

[workathomedad]

FI40 is right. 100% TIPs yield would give you your ultra-conservative SWR.

[Retire-Canada]

Realistically your safety comes as much from being flexible with spending and having the ability to earn income in retirement as it does with your withdrawal rate.

^^^ This...If working 5-10 yrs more so you can save enough not to have to work part-time for a year during FIRE makes you feel better then by all means crush that SWR down to 1% or less, but don't fool yourself into thinking that's efficient in any sense of the word.

-- Vik

[sol]

The problem with this reasoning is that it's not a linear response curve.   Retiring on a 2% SWR requires almost twice as many working years as retiring on a 4% SWR, for only a slight increase in historical success rate.

The safest withdrawal rate is zero.  Work forever and save all of it.  Live in a cardboard box and eat out of dumpsters.  Is that really what you were asking?

If you accept that you ARE going to spend something, then you need to figure out how much work you're willing to do in exchange for how much safety.  Would you work 15 years for an 85% chance of never working again?  Great, then you need to save 50%.  Want 100% success at 50% savings rate?  Better plan to work more like 25 years.  Would you work 40 years for a 90% chance?  Okay, then you can get by with a 30% savings rate.  See how that works? 

Not that any of this math is 100% safe anyway.  If swine flu takes 90% of the world population in 2035 then you're not safe.  If terrorists nuke Manhattan then you're not safe.  If you run over a pedestrian and get sued then you're not safe.

A quick refresher:  safety is an expensive illusion.

[gimp]

Sol, I would like to see the math showing that 2% SWR requires twice as many working years as 4%. What are your assumptions?

It looks to me that it would, on average, require a little less than 10 years. If you assume constant 7% growth, your principal doubles every 10 years; during that time if you still work and save the required time drops, but inflation increases your required amount a bit over that time as well.

Am I wrong?

[arebelspy]

Sol, I would like to see the math showing that 2% SWR requires twice as many working years as 4%. What are your assumptions?

I've pointed that out to him before - it requires twice as much money, but not necessarily twice as much time.

Regardless, his overall point remains valid.

There's no safe withdrawal rate.  There's only whatever you feel comfortable with.  We can't tell you a rate that you can feel safe with, you have to decide that for yourself.

[FastStache]

The problem with this reasoning is that it's not a linear response curve.   Retiring on a 2% SWR requires almost twice as many working years as retiring on a 4% SWR, for only a slight increase in historical success rate.

The safest withdrawal rate is zero.  Work forever and save all of it.  Live in a cardboard box and eat out of dumpsters.  Is that really what you were asking?

If you accept that you ARE going to spend something, then you need to figure out how much work you're willing to do in exchange for how much safety.  Would you work 15 years for an 85% chance of never working again?  Great, then you need to save 50%.  Want 100% success at 50% savings rate?  Better plan to work more like 25 years.  Would you work 40 years for a 90% chance?  Okay, then you can get by with a 30% savings rate.  See how that works? 

Not that any of this math is 100% safe anyway.  If swine flu takes 90% of the world population in 2035 then you're not safe.  If terrorists nuke Manhattan then you're not safe.  If you run over a pedestrian and get sued then you're not safe.

A quick refresher:  safety is an expensive illusion.

While I agree with what you are saying in principal, obviously no SWR will guarantee a 100% success ratio.

At the moment, my definition is going to be if my portfolio, inflation adjusted, can support my withdrawal rate 30 years in the future, since when I FIRE my life expectancy should be longer than 30. I will likely use cFireSim for this exercise.

[RWD]

I'm one of those that would like to FIRE for good when I choose to do so. I think it is more efficient to keep the money growing than to leave and then realize you need more to get by. I'd rather work an extra year or two to get to that point then worrying about drawing down at 4%.

What is an extremely safe SWR? 2%? 3%? 3.3%? I would say a very safe rate is one that has 100% success given any 30 year period and then a safety buffer on top of that.

If you don't increase for inflation you can withdraw 3.3% for 30 years just by stuffing your money in a savings account...

[Gone Fishing]

Mathmatically, you can not run out of money with any fixed % withdrawal rate if you forego inflation adjustments, but if your % is too high, your withdrawals will tail off over time.

The dividends only withdrawal strategy is pretty failsafe as far as not running out of money, but may leave you cutting spending a fair bit during a deep recession. For example, you would have taken a  23% paycut in 2009.

http://www.bogleheads.org/wiki/Withdrawal_methods

http://www.multpl.com/s-p-500-dividend/table

[hodedofome]

I'd say 2-3%, on a worldwide allocation to stocks and bonds, would be pretty dang safe for all but the most horrid of economic environments (I'm talking end of the world as we know it type stuff).

[brooklynguy]

At the moment, my definition is going to be if my portfolio, inflation adjusted, can support my withdrawal rate 30 years in the future, since when I FIRE my life expectancy should be longer than 30. I will likely use cFireSim for this exercise.

Cfiresim has a feature that will tell you the maximum withdrawal rate that had a 100% historical success rate for your specific inputs.  Just enter all of your inputs, and before you run the simulation, click "maximum yearly/initial spending for success rate" under "Investigate" on the right-hand side (and set the success rate to 100%).

But the way you phrased the quoted text leads me to believe you may be misunderstanding something.  Keep in mind that cfiresim's default setting is that a "failure" means you completely run out of money before the end of the period (you can change this setting).  I'm not sure what you are trying to determine by simulating a 30 year period if your life expectancy is longer than 30 years.

[okonumiyaki]

Given the chances of a catastrophic war/ inflation/ whatever 100% certainty can't be guaranteed anyway. 

[arebelspy]

Given the chances of a catastrophic war/ inflation/ whatever 100% certainty can't be guaranteed anyway.

This is generally where the 80% figure from Bernstein's Retirement Calculator from Hell Part III is quoted, along with this link provided:
http://www.efficientfrontier.com/ef/901/hell3.htm

So, think about what a 97% 40-year success rate means: the absence of all of the above for approximately the next 1,200 years. (A 97% success rate means a 3% failure rate; those 40 years divided by 0.03 is 1,200 years.) Ignore for a minute the uncertainties of the less-developed world and think only about the winners: Germany—in this century alone, three episodes of military and/or economic disaster, the first two associated with mass starvation. Japan—wartime devastation even worse than Germany’s. England—near brushes with disaster in 1812-1814 and in both world wars. And even the United States—repeated banking failures, civil war, and the near-bankruptcy of the Treasury in the 19th century. The near collapse of the capitalist economy in the 1930s. And oh yes, I almost forgot—the entire globe barely missed mass incineration in October 1962.

History’s best-case scenario was the Roman Empire, which survived more or less intact for about seven centuries (if you ignore the odd sackings of the capital after 200 A.D.).

A wildly optimistic historian might give us another few centuries of economic, political, and military continuity. Back-of-the-envelope, that’s about an 80% survival rate over the next 40 years. Thus, any estimate of long-term financial success greater than about 80% is meaningless.

(Emphasis original.)

:)

[Retire-Canada]

That's a real risk of the OMY or OM$1M approach to FIRE. You burn through years banking extra safety $$ while you are healthy and able to enjoy freedom for larger investments that may not matter at all for a number of reasons.

I buried a friend recently that put all her efforts into paying off a $400K mortgage fast to enjoy life debt free. She died with $8K left on the loan.

Saving and investing is smart, but at some point assuming more money is buying your more safety and ignoring the costs/risks of that approach is no longer smart.

-- Vik

[Sid Hoffman]

The dividends only withdrawal strategy is pretty failsafe as far as not running out of money, but may leave you cutting spending a fair bit during a deep recession. For example, you would have taken a  23% paycut in 2009.

I didn't quote it again, but you listed the dividends of the S&P 500.  There is an alternative though, such as the Vanguard High Dividend Yield Index Fund Investor Shares (VHDYX).  Even in today's "overpriced" market it's showing almost a 3% yield (2.96%).  As long as you have at least a modest cash buffer, you'll come through that OK.  From the fund's history the price & yield look like this:

02Jan08: $20.00, 2.78% yield, $0.556 calculated distribution
02Jan09: $13.64, 4.26% yield, $0.581 calculated distribution
03Mar09: $9.35, 5.29% yield, $0.494 calculated distribution

Their website isn't showing the yield correctly for some reason by 2010's historical data, but the bottom line here is that fund is specifically chosen for reliable dividend distributions.  Even when the price was down from $20 to $13.64 the dividend distribution recorded as even higher than before.  Even at half it's price when the market bottomed out the distributions were still showing very close to the same as what they were before.  Overall it appears the annualized dividends were not much changed in 2009 from what they were in 2008.

Given that this fund seems to throw off 2.7-4% dividends over history while still increasing in value faster than the rate of inflation, I'd say this is a great example of making a case for saying 3% SWR can be done safely even for an extreme early retirement, like 50 years even by an ultra-conservative planner.  Your greater risks at that point are from very practical things like healthcare costs higher than you planned, or an accident of some kind requiring much more money than you had budgeted.

Myself, I'm looking to stay somewhere on the very conservative end of the planning chart, and even I have seen little value in planning for worse than a 3% SWR for reasons outlined above.

[sol]

Sol, I would like to see the math showing that 2% SWR requires twice as many working years as 4%. What are your assumptions?

If your investment returns only keep pace with inflation then it's exactly twice as long because it's exactly twice as much.

If you assume 50% growth per year, then it's less than two extra years.  Reality probably lies somewhere in between, but I tend to imagine that a person who is aiming for a 2% SWR is probably the type of person who chooses low-yield "safe" investments.  And that's part of the fun of this community; a person who believes in a 5% SWR is much more likely to succeed with it than someone who doesn't, just because the yield curve is probabilistically separate from the historical sequence of return risk.  If you think anything above a 1.75% SWR is risky, then you're probably right.  If you think 5% is probably fine, you're also probably right. 

It all depends on what you you're investing in, doesn't it?

[deborah]

It really depends. My savings rate was 80%, so my investments didn't have time to get much interest, and it wouldn't matter whether they were in high or low risk investments. If your savings rte is 15%, the yield really matters.

[skyrefuge]

From the fund's history the price & yield look like this:

02Jan08: $20.00, 2.78% yield, $0.556 calculated distribution
02Jan09: $13.64, 4.26% yield, $0.581 calculated distribution
03Mar09: $9.35, 5.29% yield, $0.494 calculated distribution

I'm not sure what source you're using for that data, but mine disagrees with both your values and your conclusion. Here is VHDYX's yearly dividend total with its yearly %change, and compared to VFINX (S&P500 fund):

Code: [Select]

          VHDYX                VFINX
2008  $0.55  7.06%     $2.51  0.60%
2009  $0.44  -18.68%     $2.10  -16.01%
2010  $0.42  -6.31%     $1.97  -6.56%
2011  $0.51  21.88%     $2.25  14.24%
2012  $0.61  20.91%     $2.70  20.17%
2013  $0.67  9.95%     $2.95  9.23%
2014  $0.74  9.05%     $3.30  11.94%
So VHDYX fell harder than VFINX (I believe the VFINX numbers are different than multipl's numbers because the fund pays the dividends delayed vs. the index). It also left someone used to spending $20000/year in 2008 with only ~$15000 to spend in 2010, which, in my universe, are two figures that will never be described as "very close".

Using the dividend payout amount as your withdrawal-rate is total arbitrary bullshit (the "sell shares until I hold an even multiple of 47" strategy has just as much logic behind it), but I do agree with you that such a strategy is good for showing what a conservative lower-bound is for a Safe Withdrawal Rate.

[Sid Hoffman]

I'm not sure what source you're using for that data, but mine disagrees with both your values and your conclusion.

I was going based on what I could gather from the Vanguard website.  Figures that even yahoo would have more complete data than the fund owner itself.  Ugh.  Anyway, well, at the heart of it you still agreed with my conclusion that 3% is an extremely safe number, so I'll take the wins wherever I can get them.  :P

[FastStache]

Sol, I would like to see the math showing that 2% SWR requires twice as many working years as 4%. What are your assumptions?

If your investment returns only keep pace with inflation then it's exactly twice as long because it's exactly twice as much.

If you assume 50% growth per year, then it's less than two extra years.  Reality probably lies somewhere in between, but I tend to imagine that a person who is aiming for a 2% SWR is probably the type of person who chooses low-yield "safe" investments.  And that's part of the fun of this community; a person who believes in a 5% SWR is much more likely to succeed with it than someone who doesn't, just because the yield curve is probabilistically separate from the historical sequence of return risk.  If you think anything above a 1.75% SWR is risky, then you're probably right.  If you think 5% is probably fine, you're also probably right. 

It all depends on what you you're investing in, doesn't it?

I have an 80/20 stock/bond split at the moment and may change it to be more aggressive in the future, if stocks go on sale again. I'm sure I'll looking at a 60/40 split when I get closer to FIRE.

From what I can gather, 3% seems to be pretty much on the safe side, and this is likely going to be my number for the time being.

[MDM]

For someone saving $15K/yr, expecting to need $30K/yr in retirement, and starting with $0 invested assets, the table below shows years to FI.  Rows are the assumed Withdrawal Rate, columns are the assumed investment return.  E.g., it would take 23.4 years at 6% investment return for a 3% WR.

         2%    4%     6%     8%
5%   36.7   25.7   20.1   16.6
4%   41.0   28.0   21.6   17.7
3%   46.9   31.0   23.4   18.9
2%   55.5   35.0   25.8   20.5

The equation is
    Time in years to FI = Ln((S + i*E/WR) / (S + i*A)) / Ln(1 + i)

A = Asset amount currently invested in funds you will draw upon in retirement.
E = Total (including taxes) annual expenses in retirement
i =  Return on invested retirement funds.
S = Annual amount invested in funds you will draw upon in retirement.
WR = Withdrawal Rate planned for retirement, using Trinity Study definitions.

[deborah]

There is an elephant in the room. No-one starts from 0 net worth. Often they start negative because of student loans. Also, as net worth does not include your PPOR for ER purposes, people are often paying off their PPOR, and then they suddenly have this enormous extra amount of cash that they can put towards their net worth.

[MDM]

There is an elephant in the room. No-one starts from 0 net worth. Often they start negative because of student loans. Also, as net worth does not include your PPOR for ER purposes, people are often paying off their PPOR, and then they suddenly have this enormous extra amount of cash that they can put towards their net worth.

1) If negative, then put in a negative value for "A" in the above equation and increase S to include the amount going toward loan payoff.  Not perfect (values of "i" for loans are probably different from "i" for investments) but maybe not too bad...?

2) Yes, mortgage payments for your Principal Place Of Residence (took me a while to figure that one) are difficult to include in a simple equation.  The closer the remaining term on the mortgage is to the time to FI, the better the approximation of ignoring the mortgage payments altogether.

[PathtoFIRE]

...a person who believes in a 5% SWR is much more likely to succeed with it than someone who doesn't...

I've been devouring PF blogs and forums for 2 years, and this statement just blew my mind. I think this is an extremely important point, and should probably be pointed out at least once during each discussion of WRs and SWRs.

[Bob W]

If a SWR fell in the woods and no one was there to hear it --- Would it still be a SWR?

[arebelspy]

...a person who believes in a 5% SWR is much more likely to succeed with it than someone who doesn't...

I've been devouring PF blogs and forums for 2 years, and this statement just blew my mind. I think this is an extremely important point, and should probably be pointed out at least once during each discussion of WRs and SWRs.

I think it very much depends on why they believe it will succeed.

If they think 5% WR is safe because the market goes up 7% annually on average, they may not succeed.

If they think the 5% WR is safe because they understand the need to be flexible and reduce spending during market downturns (so not a true 5% WR, but variable), then they are more likely to succeed.

Knowledge around one's WR and AA is vital - blind optimism doesn't help a higher WR succeed for no rational reason.

[sol]

Knowledge around one's WR and AA is vital - blind optimism doesn't help a higher WR succeed for no rational reason.

By contrast, blind pessimism guarantees that it never works because that person never tries it.

Anybody shooting for a SWR with a higher than 50% success rate is probably oversaving. 

[arebelspy]

Anybody shooting for a SWR with a higher than 50% success rate is probably oversaving.

So when's your FIRE date, Mr. Oversaver?  ;)

[brooklynguy]

I think it very much depends on why they believe it will succeed.

But the point was that someone who believes in the safety of a higher withdrawal rate is more likely to be a person who is willing to use a more aggressive allocation, which in turn increases the odds that their belief in the safety of the higher withdrawal rate will turn out to be accurate (and vice versa) (which, notwithstanding sol's artful use of language, is old news).

[sol]

So when's your FIRE date, Mr. Oversaver?  ;)

My FI date is now, based on our minimum level expenses.  My RE date is in 2018.

Much like you, we intend to spend more in retirement than we do now. 

[arebelspy]

I think it very much depends on why they believe it will succeed.

But the point was that someone who believes in the safety of a higher withdrawal rate is more likely to be a person who is willing to use a more aggressive allocation, which in turn increases the odds that their belief in the safety of the higher withdrawal rate will turn out to be accurate (and vice versa) (which, notwithstanding sol's artful use of language, is old news).

My point was that:
1) They may believe in a higher WR due to ignorance (i.e. "market returns 7% on average so 5% is more than safe"), and
2) Even if what you state is true, that they have a more aggressive allocation, that doesn't solve the psychological issues (panic when it crashes - and it will more often for them, as they'll have more volatility, if what you propose is true).

Just having a higher WR doesn't make you more likely to succeed, that's ridiculous.

A person who purposefully chooses a higher WR, understanding what that entails, and why, and has plans to mitigate damage when things change is more likely to succeed.  That's the important caveat to "higher WR = (possibly) more success."

[brooklynguy]

Just having a higher WR doesn't make you more likely to succeed, that's ridiculous.

Yes, of course that is all true.  My point was just that sol's point (I believe) was what I stated; I doubt he meant to suggest that belief in the safety of a higher WR in and of itself creates a self-fulfilling prophecy (someone can't will their stash of 100% bonds into generating returns sufficient to support a 5% WR for 50 years simply by believing hard enough).

[brooklynguy]

One thing that often seems overlooked by people prepaying loans on this forum is that taking out a loan does not affect your net worth.

This is an excellent point that is often overlooked even by some of the most sophisticated FIRE scholars in this forum.  I'm planning on keeping my mortgage loan outstanding in retirement, and through mental accounting I separate my target stash into two buckets:  one equal to the outstanding principal balance of the mortgage on my FIRE date (which will be used to service the mortgage principal + interest payments until maturity), and another equal to the stash size needed to service all of my non-mortgage expenses using my desired withdrawal rate.  Because my mortgage has a low interest rate and a long remaining life to maturity (meaning that my portfolio returns are very likely to outperform the mortgage), shooting for the "mortgage-servicing bucket" of my stash to be equal to the entire outstanding principal balance as of my FIRE date is really more conservative than necessary, but that's just part of my safety margin.

[Scandium]

Tried to come up with the most conservative portfolio. Assume:
Retire at 40
Live to 110
$40k/year expenses
3% inflation
Everything in cash!

This would require a portfolio (i.e. bank account) of $9,223,763. There you go. You can take out $40k per year, inflation adjusted for 70 years.

Maybe not conservative enough? What if inflation is higher? Say 5%. You'd need $23.5 million..

[arebelspy]

Tried to come up with the most conservative portfolio. Assume:
Retire at 40
Live to 110
$40k/year expenses
3% inflation
Everything in cash!

This would require a portfolio (i.e. bank account) of $9,223,763. There you go. You can take out $40k per year, inflation adjusted for 70 years.

Maybe not conservative enough? What if inflation is higher? Say 5%. You'd need $23.5 million..

...for an SWR of 0.17%.  That's a good call.  Anything above 0.2% is wildly reckless.  ;)

[Tyler]

"Any estimate of long-term financial success greater than about 80% is meaningless." -- William Bernstein

http://www.efficientfrontier.com/ef/901/hell3.htm

With the right portfolio, a 3-4% withdrawal rate buys you a reasonable amount of financial safety.  But rates below that are not necessarily any safer.  At some point you need to switch the mentality from pure risk-aversion to resilience or even anti-fragility (where negative events make you stronger).  Life is not a Monte Carlo simulation.

EDIT: I noticed after posting this that Arebelspy already did.  +1!

[deborah]

Life is not a Monte Carlo simulation.

Sometimes it seems like it is!

[MMMdude]

0.7% - the Japanese SWR - this is the worst country SWR that has been calculated. On the assumption that any country can change.

This is the one thing I worry about - what if we have a Japanese type occurrence?  Savings will be basically worthless.  It is scary though to think about as converted it works out to 142X annual expenses lol

I personally am aiming for a 3.25% withdrawal rate.  3 or under 3 is just too conservative I believe.

[steveo]

Knowledge around one's WR and AA is vital - blind optimism doesn't help a higher WR succeed for no rational reason.

By contrast, blind pessimism guarantees that it never works because that person never tries it.

Anybody shooting for a SWR with a higher than 50% success rate is probably oversaving.

Are you serious with the 50% success rate. That sounds way too optimistic.

[Retire-Canada]

Are you serious with the 50% success rate. That sounds way too optimistic.

Just for a laugh I ran the cFIREsim to see how a constant WR fares if you add a little flexibility including a 50% success scenario.

Unless stated I left the variables in their default settings.

4% WR = ~93% success - 3% to 6% WR/4.5%Avg WR = 100% success

5% WR = ~70% success - 4% to 7% WR/5.2% Avg WR = ~90% success

6% WR = ~49% success - 5% to 8% WR/5.9% Avg WR = ~64% success
6% WR = ~49% succes - 4% to 8% WR/5.6% Avg WR = ~83% success
6% WR = ~49% success - 3% to 8% WR/5.4% Avg WR = ~98% success
6% WR = ~49% success - 3% to 8% WR + CDN CPP/OAS/5.6% Avg WR = 100% success [using my gov't benefit data]

It's interesting that will just a bit of flexibility you can dramatically increase the success rate of your plan against historical data.

My own view is that it's better to save to a reasonable WR and then mitigate risk with flexibility vs. more invested money.

-- Vik

[Scandium]

Are you serious with the 50% success rate. That sounds way too optimistic.

My own view is that it's better to save to a reasonable WR and then mitigate risk with flexibility vs. more invested money.

-- Vik

Sure, but in some of those scenarios the flexibility can be from a 6% WR to 3%, cutting you income in half. Or in other words; going from covering our current spending, vs barely covering the mortgage alone! At some point it wouldn't work. Personally a WR of 5% maybe, depending on circumstances. But I'd probably try to stay around 4%. And let social security and potentially inheritance be the safety net.

I worry I'll only get one shot at retirement.  As an engineer, after a few years out of the workforce there's no way I'd get a job again (especially not at 40-50), unless it's flipping burgers. When rapidly changing technical knowledge is your only marketable skills you have to be careful.

[Retire-Canada]

Sure, but in some of those scenarios the flexibility can be from a 6% WR to 3%, cutting you income in half.

If you look at them the higher number is +2% over the constant WR and the lower number is only -1%.

So if 4% WR works for you say $40K/yr - your variability is $30K to $60K/yr. So at most you are down 25%.

I would also consider that years you make $60K you can either leave the extra $20K in the investments or take care of long-term costs [new roof, new car, etc..]. I assume MMM types won't blow an extra $20K if their COL is $40K. You could set up a liquid emergency fund with this money so on years where you need to only take $30K from investments you can top it up to whatever is comfortable.

Ultimately that's the point of being flexible - you reduce risk, but you don't really reduce quality of life.

-- Vik

[Scandium]

Sure, but in some of those scenarios the flexibility can be from a 6% WR to 3%, cutting you income in half.

If you look at them the higher number is +2% over the constant WR and the lower number is only -1%.

So if 4% WR works for you say $40K/yr - your variability is $30K to $60K/yr. So at most you are down 25%.

I would also consider that years you make $60K you can either leave the extra $20K in the investments or take care of long-term costs [new roof, new car, etc..]. I assume MMM types won't blow an extra $20K if their COL is $40K. You could set up a liquid emergency fund with this money so on years where you need to only take $30K from investments you can top it up to whatever is comfortable.

Ultimately that's the point of being flexible - you reduce risk, but you don't really reduce quality of life.

-- Vik

I'm a bit unclear on the variable spending options in cFiresim. I'll have to look into that more. For the default constant WR you can't "take out more" the years when you do well (for a new roof or car), as the simulation assume these good years make up for the bad ones. But I know some versions of the simulation assume you do. So that would be ok, as long as you don't spend more than what the simulation assume, so you can still make up for poor returns. Which of the Spending plan options did you use? The % of portfolio, with floor/ceiling values? I ran that and got a similar result.

As I've said before, I dislike my job a lot less than living in squalor without money for heat or food for 3 years because the market is down.. That may be "flexible" but is not my idea of retirement.

[FastStache]

I think it very much depends on why they believe it will succeed.

But the point was that someone who believes in the safety of a higher withdrawal rate is more likely to be a person who is willing to use a more aggressive allocation, which in turn increases the odds that their belief in the safety of the higher withdrawal rate will turn out to be accurate (and vice versa) (which, notwithstanding sol's artful use of language, is old news).

My point was that:
1) They may believe in a higher WR due to ignorance (i.e. "market returns 7% on average so 5% is more than safe"), and
2) Even if what you state is true, that they have a more aggressive allocation, that doesn't solve the psychological issues (panic when it crashes - and it will more often for them, as they'll have more volatility, if what you propose is true).

Just having a higher WR doesn't make you more likely to succeed, that's ridiculous.

A person who purposefully chooses a higher WR, understanding what that entails, and why, and has plans to mitigate damage when things change is more likely to succeed.  That's the important caveat to "higher WR = (possibly) more success."

If you took the same person but gave them more money to start, the probability of success will go up even higher. I'm still at least 10 years out, but that's also not an eternity of time, so I was curious. The simulations with flexibility built in has been eye-opening to say the least.

[sol]

Are you serious with the 50% success rate. That sounds way too optimistic.

I was very careful with my choice of words.  By definition, anything more than a 50 percent success rate means you are more likely to have oversaved than undersaved.

[Retire-Canada]

As I've said before, I dislike my job a lot less than living in squalor without money for heat or food for 3 years because the market is down.. That may be "flexible" but is not my idea of retirement.

^^^ this is crazy talk and not even remotely what is being discussed.

-- Vik

[Scandium]

As I've said before, I dislike my job a lot less than living in squalor without money for heat or food for 3 years because the market is down.. That may be "flexible" but is not my idea of retirement.

^^^ this is crazy talk and not even remotely what is being discussed.

-- Vik

The idea of frugal from some people here sounds like that to me. Never turning the heat on, no car or travel anywhere, Starbucks wifi only and finding food in dumpsters. This is "cutting back"... Good for them, but not for me.