Here's how to reconcile the Cathy vs. Dodge debate:
Cathy is talking about the actual chances of retirement success (which has the problem of being impossible to predict). Dodge is talking about the forecasted chances of retirement success using history as a guide (which has the problem of not necessarily being accurate).
Yep. The reason we rely on 4% SWR studies is not because we trust them to accurately predict our financial paths. We rely on them because
we don't have anything better. The 4% SWR is an extremely rough rule-of-thumb. It would certainly be better to choose our FIRE date based on the intrinsic value of our portfolio and its future returns, but since we know neither of those things, we're forced to fall back to SWR studies. To paraphrase Churchill: "The 4% SWR is the worst form of retirement-readiness predictor, except for all the rest"
Furthermore, it's critical to remember that the 4% SWR is a
worst-case number, not an average-case number.
Say that at a market peak, Adam had a $1M portfolio and Betty had a $2M portfolio (so Betty unarguably has much more "intrinsic value"). Adam retires with $1M and uses a 4% WR. A month later, the market crashes, and Betty's portfolio is cut in half to $1M. She then retires, also with $1M and uses a 4% WR. Cathy would say that Adam is in a worse position than Betty, and she's right. But according to the 4% SWR rule-of-thumb,
neither of their plans would fail.
However, that doesn't mean the 4% SWR calculations are unaware of the difference between the two. In a cFIREsim graph, Adam's line would likely be one that ends with a portfolio value near 0, while Betty's would likely be one that soars up-and-up-and-up and she dies with way more than the $1M she started with.
That worst-case nature is
why we feel comfortable relying on 4% SWR studies, despite its ignorance of intrinsic values and future returns. The 4% SWR essentially counterbalances that ignorance by taking an extremely pessimistic approach.