Length of SORR risk period for early retirees

[bluecollarmusician]

Worth a reminder that SORR also goes both ways.

While there is a small likelihood that a very bad SORR can derail you- if you aim for a conservative WR, there is far greater likelihood that you will end up with much more money than you need.  We are already starting to see that amongst many of our long timer folks here.

The statement was made somewhere upstream in this thread that "you don't have to worry about spending it all"- you do actually, when you are dead that money will go somewhere.  The easy/lazy button is to just "leave it all to the kids...." but I would argue that there is a big onus to handle wealth responsibly and it is a new skill set to learn for someone who has learned to maximize life enjoyment on somewhat "less" than the norm. I think that this is something to take seriously- and it is a more likely scenario to face when talking about SOR... this is the more likely scenario to face and one to plan for as well.

[bluecollarmusician]

SORR is just one of many, many risks in life, and it's not even close to the most difficult financial risk to manage. SORR did nothing to my investments since I left work in 2020, but the 6 figures in medical bills certainly did.

This point is well made about the diversity of risk factors- the unknown unknown. I am sorry that you have to deal with this- but I believe that the same skill sets that made you successful in career and planning for FIRE made you well qualified to handle this change of plans.  By solving difficult problems, you were prepared to solve more difficult problems when they presented themselves.  The fear that "something might go wrong" is not how to plan- the way to plan is to develop robust strategies to handle things when they DO go wrong- these strategies are also highly effective when things go "right..."

[Metalcat]

SORR is just one of many, many risks in life, and it's not even close to the most difficult financial risk to manage. SORR did nothing to my investments since I left work in 2020, but the 6 figures in medical bills certainly did.

This point is well made about the diversity of risk factors- the unknown unknown. I am sorry that you have to deal with this- but I believe that the same skill sets that made you successful in career and planning for FIRE made you well qualified to handle this change of plans.  By solving difficult problems, you were prepared to solve more difficult problems when they presented themselves.  The fear that "something might go wrong" is not how to plan- the way to plan is to develop robust strategies to handle things when they DO go wrong- these strategies are also highly effective when things go "right..."

Spot on.

My life is actually substantially better than it was before I became disabled. The biggest benefit I got from discovering MMM was that I spent years learning to truly understand how to make money, time, and energy work for me.

In essence, I got very good at running Malcat Inc.

Honestly, had my life worked out as planned, it wouldn't be nearly as  awesome.

[Ron Scott]

SORR is just one of many, many risks in life, and it's not even close to the most difficult financial risk to manage. SORR did nothing to my investments since I left work in 2020, but the 6 figures in medical bills certainly did.

This point is well made about the diversity of risk factors- the unknown unknown.

My life is actually substantially better than it was before I became disabled. The biggest benefit I got from discovering MMM was that I spent years learning to truly understand how to make money, time, and energy work for me.

You’re not alone.

Inflation is probably everybody’s #1 nest egg robber, but in retirement healthcare is cited more than anything else. That’s followed by home repairs.

We love to shut our eyes to inflation, claiming we can “beat it”, or convincing ourselves that “real returns” take care of it. Of course you can’t just beat it, but its nice to have equities so you own what’s going up in price.

But as you say, 6-figure healthcare tabs can wake you up.

I imagine some people would wonder if they oversaved if they put aside extra funds for healthcare, home maintenance, and other unknowns. Say $150 in a reasonable 50-50 bucket? Most probably see it as prudent.

[GilesMM]

SORR is just one of many, many risks in life, and it's not even close to the most difficult financial risk to manage. SORR did nothing to my investments since I left work in 2020, but the 6 figures in medical bills certainly did.

This point is well made about the diversity of risk factors- the unknown unknown.

My life is actually substantially better than it was before I became disabled. The biggest benefit I got from discovering MMM was that I spent years learning to truly understand how to make money, time, and energy work for me.

You’re not alone.

Inflation is probably everybody’s #1 nest egg robber, but in retirement healthcare is cited more than anything else. That’s followed by home repairs.

We love to shut our eyes to inflation, claiming we can “beat it”, or convincing ourselves that “real returns” take care of it. Of course you can’t just beat it, but its nice to have equities so you own what’s going up in price.

But as you say, 6-figure healthcare tabs can wake you up.

I imagine some people would wonder if they oversaved if they put aside extra funds for healthcare, home maintenance, and other unknowns. Say $150 in a reasonable 50-50 bucket? Most probably see it as prudent.

Like $50k for roof and home repairs, $50 for a couple months nursing home care and $50k miscellaneous?

[tooqk4u22]

SORR is just one of many, many risks in life, and it's not even close to the most difficult financial risk to manage. SORR did nothing to my investments since I left work in 2020, but the 6 figures in medical bills certainly did.

This point is well made about the diversity of risk factors- the unknown unknown.

My life is actually substantially better than it was before I became disabled. The biggest benefit I got from discovering MMM was that I spent years learning to truly understand how to make money, time, and energy work for me.

You’re not alone.

Inflation is probably everybody’s #1 nest egg robber, but in retirement healthcare is cited more than anything else. That’s followed by home repairs.

We love to shut our eyes to inflation, claiming we can “beat it”, or convincing ourselves that “real returns” take care of it. Of course you can’t just beat it, but its nice to have equities so you own what’s going up in price.

But as you say, 6-figure healthcare tabs can wake you up.

I imagine some people would wonder if they oversaved if they put aside extra funds for healthcare, home maintenance, and other unknowns. Say $150 in a reasonable 50-50 bucket? Most probably see it as prudent.

Like $50k for roof and home repairs, $50 for a couple months nursing home care and $50k miscellaneous?

I basically am doing this - I used to have separate slush fund accounts for emergencies, home/car repair/replacement, travel, etc but over time (bc we never took withdrawals when those costs were incurred while working) they got big enough where I consolidated to one account and plan for 3-4% wr for those items on top of the monthly amount that is automatically transferred to that account as part of our budget. 

I imagine it will turn into our long term care fund in the future. 

[FIREin2018]

For those who believe Trinity will work in the future, they can take 4% for 30 years and inflate it annually. But SORR can interfere, with people estimating the first 7-10 years as the risk period. Lots of “beliefs” in all this obviously.

So if you retire at 40, is the risk period up to 30 years? Or do you think you’re in the clear by 40?

I never heard of SORR when i FiRED in 2018 at age 47.
I guess ignorance is bliss?

Wasn't worried about COVID because i believed in the 4% rule, which to me meant my portfolio will increase over 30yrs in a total market/total bonds/total intl asset allocation so don't worry about short term.
(Again, ignorance is bliss about SORR)

And now thx to the bull market since Covid, i have more $ now than when i FiRED in 2018.
Spending 6yrs of expenses and i have more $ now... i still can't wrap my head around that. (My expenses are only about $25/yr)

Also, i now think 4% rule is too much. (See my SIG about 5% rule if 60%/40% AA and 6% rule if you're willing to do 75%/25% AA in retirement).

And 6 yrs after I FiRED, i never heard of Trinity. Had to goggle it.
Again, ignorance is bliss?

[joedad189]

ptf

[secondcor521]

For those who believe Trinity will work in the future, they can take 4% for 30 years and inflate it annually. But SORR can interfere, with people estimating the first 7-10 years as the risk period. Lots of “beliefs” in all this obviously.

So if you retire at 40, is the risk period up to 30 years? Or do you think you’re in the clear by 40?

I never heard of SORR when i FiRED in 2018 at age 47.
I guess ignorance is bliss?

Wasn't worried about COVID because i believed in the 4% rule, which to me meant my portfolio will increase over 30yrs in a total market/total bonds/total intl asset allocation so don't worry about short term.
(Again, ignorance is bliss about SORR)

And now thx to the bull market since Covid, i have more $ now than when i FiRED in 2018.
Spending 6yrs of expenses and i have more $ now... i still can't wrap my head around that. (My expenses are only about $25/yr)

Also, i now think 4% rule is too much. (See my SIG about 5% rule if 60%/40% AA and 6% rule if you're willing to do 75%/25% AA in retirement).

And 6 yrs after I FiRED, i never heard of Trinity. Had to goggle it.
Again, ignorance is bliss?

Ignorance is bliss if the odds work out in your favor.  But over the long run, your luck will tend to average, which means there will be occasions where the odds don't work out.  Knowing that ahead of time and making plans or taking actions to minimize that risk is probably wiser.

I knew about SORR, although not by that name, when I retired.  Like you, I've been fortunate and didn't end up facing that situation.  However, I'm happy I was prepared to deal with it if it arose.

By the way, the 4% rule as generallly understood doesn't mean your portfolio grows.  Roughly, a 4% WR is 95% historically likely to have more than $0 left at the end of a 30 year period.  It is not designed to result in a portfolio that is preserved, let alone one that grows.  Yes, that's what happened in your case and in mine, but those unlucky historical patches (like the late 1960s) would result in depleting or nearly depleting a portfolio with a 4% WR.

[FIREin2018]

For those who believe Trinity will work in the future, they can take 4% for 30 years and inflate it annually. But SORR can interfere, with people estimating the first 7-10 years as the risk period. Lots of “beliefs” in all this obviously.

So if you retire at 40, is the risk period up to 30 years? Or do you think you’re in the clear by 40?

I never heard of SORR when i FiRED in 2018 at age 47.
I guess ignorance is bliss?

Wasn't worried about COVID because i believed in the 4% rule, which to me meant my portfolio will increase over 30yrs in a total market/total bonds/total intl asset allocation so don't worry about short term.
(Again, ignorance is bliss about SORR)

And now thx to the bull market since Covid, i have more $ now than when i FiRED in 2018.
Spending 6yrs of expenses and i have more $ now... i still can't wrap my head around that. (My expenses are only about $25/yr)

Also, i now think 4% rule is too much. (See my SIG about 5% rule if 60%/40% AA and 6% rule if you're willing to do 75%/25% AA in retirement).

And 6 yrs after I FiRED, i never heard of Trinity. Had to goggle it.
Again, ignorance is bliss?

Ignorance is bliss if the odds work out in your favor.  But over the long run, your luck will tend to average, which means there will be occasions where the odds don't work out.  Knowing that ahead of time and making plans or taking actions to minimize that risk is probably wiser.

I knew about SORR, although not by that name, when I retired.  Like you, I've been fortunate and didn't end up facing that situation.  However, I'm happy I was prepared to deal with it if it arose.

By the way, the 4% rule as generallly understood doesn't mean your portfolio grows.  Roughly, a 4% WR is 95% historically likely to have more than $0 left at the end of a 30 year period.  It is not designed to result in a portfolio that is preserved, let alone one that grows.  Yes, that's what happened in your case and in mine, but those unlucky historical patches (like the late 1960s) would result in depleting or nearly depleting a portfolio with a 4% WR.

60%/40% portfolio avgs 8% over 30yrs.
a 4% swr means i have 25x expenses in the bank/retirement funds.
8% gain more than covers my expenses + inflation with 25x funds so i'm not even touching my principle.

So in down years i'm dipping into my principle but in up years i'm replenishing it and then some.
At least that's my interpretation of doing 4% rule using 60%/40%.
Am i wrong???

[tj]

For those who believe Trinity will work in the future, they can take 4% for 30 years and inflate it annually. But SORR can interfere, with people estimating the first 7-10 years as the risk period. Lots of “beliefs” in all this obviously.

So if you retire at 40, is the risk period up to 30 years? Or do you think you’re in the clear by 40?

I never heard of SORR when i FiRED in 2018 at age 47.
I guess ignorance is bliss?

Wasn't worried about COVID because i believed in the 4% rule, which to me meant my portfolio will increase over 30yrs in a total market/total bonds/total intl asset allocation so don't worry about short term.
(Again, ignorance is bliss about SORR)

And now thx to the bull market since Covid, i have more $ now than when i FiRED in 2018.
Spending 6yrs of expenses and i have more $ now... i still can't wrap my head around that. (My expenses are only about $25/yr)

Also, i now think 4% rule is too much. (See my SIG about 5% rule if 60%/40% AA and 6% rule if you're willing to do 75%/25% AA in retirement).

And 6 yrs after I FiRED, i never heard of Trinity. Had to goggle it.
Again, ignorance is bliss?

Ignorance is bliss if the odds work out in your favor.  But over the long run, your luck will tend to average, which means there will be occasions where the odds don't work out.  Knowing that ahead of time and making plans or taking actions to minimize that risk is probably wiser.

I knew about SORR, although not by that name, when I retired.  Like you, I've been fortunate and didn't end up facing that situation.  However, I'm happy I was prepared to deal with it if it arose.

By the way, the 4% rule as generallly understood doesn't mean your portfolio grows.  Roughly, a 4% WR is 95% historically likely to have more than $0 left at the end of a 30 year period.  It is not designed to result in a portfolio that is preserved, let alone one that grows.  Yes, that's what happened in your case and in mine, but those unlucky historical patches (like the late 1960s) would result in depleting or nearly depleting a portfolio with a 4% WR.

60%/40% portfolio avgs 8% over 30yrs.
a 4% swr means i have 25x expenses in the bank/retirement funds.
8% gain more than covers my expenses + inflation with 25x funds so i'm not even touching my principle.

So in down years i'm dipping into my principle but in up years i'm replenishing it and then some.
At least that's my interpretation of doing 4% rule using 60%/40%.
Am i wrong???

Real life isn't averages.

If you are going to make optimistic assumptions, you have to be willing to go back to work if you're wrong.

If you make conservative assumptions, you have less risk of needing to go back to work.

[Telecaster]

60%/40% portfolio avgs 8% over 30yrs.
a 4% swr means i have 25x expenses in the bank/retirement funds.
8% gain more than covers my expenses + inflation with 25x funds so i'm not even touching my principle.

So in down years i'm dipping into my principle but in up years i'm replenishing it and then some.
At least that's my interpretation of doing 4% rule using 60%/40%.
Am i wrong???

Maybe not "wrong" but incomplete.   A 4% SWR as commonly understood is 4% of the initial balance, adjusted annually for inflation.   That method would have survived for 30 years over all the historical periods we have data for (there are different methodologies that wind up with slightly different results, but that's the jist).    However, in some of those scenarios, the balance would have been zero at the end of 30 years.   This is important for early retirees because in many cases the time lines are longer than 30 years.   

As it turns out, in most cases the final portfolio balance at the end of 30 years is multiples of the initial balance.   But it is the rare cases where the balance goes to zero that concern us.  The different between a portfolio going to zero and winding up with a giant pile of money is the sequence of returns early in the retirement period.  Hence the term "sequences of returns risk."   After about 10 years in it should be pretty clear which direction your portfolio is headed. 

[secondcor521]

60%/40% portfolio avgs 8% over 30yrs.
a 4% swr means i have 25x expenses in the bank/retirement funds.
8% gain more than covers my expenses + inflation with 25x funds so i'm not even touching my principle.

So in down years i'm dipping into my principle but in up years i'm replenishing it and then some.
At least that's my interpretation of doing 4% rule using 60%/40%.
Am i wrong???

That's an interpretation of the 4% rule, but it's not how the 4% rule was developed and ignores SORR as another poster explained.  As a very short version, you can have multiple down years in a row with high inflation, and taking those larger bites from a shrinking pile means that, if bad enough, the subsequent growth is on a smaller amount such that the pile can't be "replenished and then some".  If you want the actual explanation in more detail, you can read about it at FIREcalc.com or read the original Trinity study which is on the web somewhere.

[FIREin2018]

As it turns out, in most cases the final portfolio balance at the end of 30 years is multiples of the initial balance.

 But it is the rare cases where the balance goes to zero that concern us. 
The different between a portfolio going to zero and winding up with a giant pile of money is the sequence of returns early in the retirement period.  Hence the term "sequences of returns risk."   After about 10 years in it should be pretty clear which direction your portfolio is headed.

That's an interpretation of the 4% rule, but it's not how the 4% rule was developed and ignores SORR as another poster explained.

As a very short version, you can have multiple down years in a row with high inflation, and taking those larger bites from a shrinking pile means that, if bad enough, the subsequent growth is on a smaller amount such that the pile can't be "replenished and then some".

 If you want the actual explanation in more detail, you can read about it at FIREcalc.com or read the original Trinity study which is on the web somewhere.

Yes, I got multiples of initial amount as well when I did my calcs in 2018 that made me decide to pull the trigger and Fire.

I am so glad I didn't know anything about Sorr.
I probably would have still pulled the trigger even if I did know.
But I would be stressed to death in 2020 when the stock market dropped by 1/3.

Not knowing and believing the 4% rule was bullet proof with my asset allocation easily got me through COVID stress free of financial worries.
Ignorance was BLISS!

I was stressed for my elderly mom during that time though.

[Wolfpack Mustachian]

For those who believe Trinity will work in the future, they can take 4% for 30 years and inflate it annually. But SORR can interfere, with people estimating the first 7-10 years as the risk period. Lots of “beliefs” in all this obviously.

So if you retire at 40, is the risk period up to 30 years? Or do you think you’re in the clear by 40?

I never heard of SORR when i FiRED in 2018 at age 47.
I guess ignorance is bliss?

Wasn't worried about COVID because i believed in the 4% rule, which to me meant my portfolio will increase over 30yrs in a total market/total bonds/total intl asset allocation so don't worry about short term.
(Again, ignorance is bliss about SORR)

And now thx to the bull market since Covid, i have more $ now than when i FiRED in 2018.
Spending 6yrs of expenses and i have more $ now... i still can't wrap my head around that. (My expenses are only about $25/yr)

Also, i now think 4% rule is too much. (See my SIG about 5% rule if 60%/40% AA and 6% rule if you're willing to do 75%/25% AA in retirement).

And 6 yrs after I FiRED, i never heard of Trinity. Had to goggle it.
Again, ignorance is bliss?

Ignorance is bliss if the odds work out in your favor.  But over the long run, your luck will tend to average, which means there will be occasions where the odds don't work out.  Knowing that ahead of time and making plans or taking actions to minimize that risk is probably wiser.

I knew about SORR, although not by that name, when I retired.  Like you, I've been fortunate and didn't end up facing that situation.  However, I'm happy I was prepared to deal with it if it arose.

By the way, the 4% rule as generallly understood doesn't mean your portfolio grows.  Roughly, a 4% WR is 95% historically likely to have more than $0 left at the end of a 30 year period.  It is not designed to result in a portfolio that is preserved, let alone one that grows.  Yes, that's what happened in your case and in mine, but those unlucky historical patches (like the late 1960s) would result in depleting or nearly depleting a portfolio with a 4% WR.

It's not designed to grow it, but it very often does. I believe it's roughly 75% of the time it either grows or at least doesn't decrease. Not disagreeing with the letter of what you said, but the tone feels a little more pessimistic than reality. Yes, the 4% was about being greater than 0, and no, you're not guaranteed to grow, but using the 4% rule, you would have grown your portfolio in many cases. I.e. it's not surprising their portfolio grew or some rare exception.

[FIRE 20/20]

<snip>
By the way, the 4% rule as generallly understood doesn't mean your portfolio grows.  Roughly, a 4% WR is 95% historically likely to have more than $0 left at the end of a 30 year period.  It is not designed to result in a portfolio that is preserved, let alone one that grows.  Yes, that's what happened in your case and in mine, but those unlucky historical patches (like the late 1960s) would result in depleting or nearly depleting a portfolio with a 4% WR.

It's not designed to grow it, but it very often does. I believe it's roughly 75% of the time it either grows or at least doesn't decrease. Not disagreeing with the letter of what you said, but the tone feels a little more pessimistic than reality. Yes, the 4% was about being greater than 0, and no, you're not guaranteed to grow, but using the 4% rule, you would have grown your portfolio in many cases. I.e. it's not surprising their portfolio grew or some rare exception.

+1 to @Wolfpack Mustachian 's comment.  While the 4% rule doesn't necessarily mean that your portfolio will grow, it is so incredibly conservative that if you FIRE into just an average economic situation your money will grow.  And if you FIRE into an above average environment it will grow a whole f'ing lot!  Only if you FIRE into the worst 5% or so of environments will your money run out after about 27-30 years or so, and only then if you're completely oblivious to what's happening or unable/unwilling to do anything about it.  If you FIRE into a bad time (but not the worst 5-10% or so times), then you should have close to what you FIRE'd with (in real terms), maybe a little more or a little less.  But at that point it's likely that S.S. will have kicked in to supplement your income.  And in that case you probably either increased your income or cut back on expenses, meaning you probably still have as much in real terms as when you FIREd. 

So while the 4% rule doesn't necessarily say that your 'stache will grow over time, in practice it usually does.  The Rich, Broke, or Dead defaults show that after 30 years there's roughly a 3% chance of having 5x your initial amount (all numbers adjusted for inflation), a 34% chance of having 2-5x your initial amount, and a 22% chance of having between 1-2x your initial FIRE amount.  That's about a 60% chance of having more than you FIREd with, even accounting for the effects of inflation.  For most people (at least in the U.S.), around the time you get to 30 years, S.S. will have kicked in, so even if you have a little less than what you FIREd with your actual income will be the same or higher - and that's even if you didn't make any adjustments to your income or spending as you saw you FIREd into bad times. 

[bmjohnson35]

We are approaching 5 yrs since I retired at 50.  Our stache is "only" 27% higher than when I retired.  We plan to sell our townhouse and buy a single family home within the next year.  I suspect we will have to pull some of the stache to make that transition. 

Like many on this forum, we never planned to blindly follow the 4% "rule".  I will probably start collecting my pension next year and I will eventually start collecting SS. These will reduce our withdrawal requirements.  SORR is certainly still a real concern for us. When will we get to the end of SORR risk?  I have no idea, but I certainly don't feel we have reached that milestone yet. 

Do I regret retiring early? Nope.   

[secondcor521]

<snip>
By the way, the 4% rule as generallly understood doesn't mean your portfolio grows.  Roughly, a 4% WR is 95% historically likely to have more than $0 left at the end of a 30 year period.  It is not designed to result in a portfolio that is preserved, let alone one that grows.  Yes, that's what happened in your case and in mine, but those unlucky historical patches (like the late 1960s) would result in depleting or nearly depleting a portfolio with a 4% WR.

It's not designed to grow it, but it very often does. I believe it's roughly 75% of the time it either grows or at least doesn't decrease. Not disagreeing with the letter of what you said, but the tone feels a little more pessimistic than reality. Yes, the 4% was about being greater than 0, and no, you're not guaranteed to grow, but using the 4% rule, you would have grown your portfolio in many cases. I.e. it's not surprising their portfolio grew or some rare exception.

+1 to @Wolfpack Mustachian 's comment.  While the 4% rule doesn't necessarily mean that your portfolio will grow, it is so incredibly conservative that if you FIRE into just an average economic situation your money will grow.  And if you FIRE into an above average environment it will grow a whole f'ing lot!  Only if you FIRE into the worst 5% or so of environments will your money run out after about 27-30 years or so, and only then if you're completely oblivious to what's happening or unable/unwilling to do anything about it.  If you FIRE into a bad time (but not the worst 5-10% or so times), then you should have close to what you FIRE'd with (in real terms), maybe a little more or a little less.  But at that point it's likely that S.S. will have kicked in to supplement your income.  And in that case you probably either increased your income or cut back on expenses, meaning you probably still have as much in real terms as when you FIREd. 

So while the 4% rule doesn't necessarily say that your 'stache will grow over time, in practice it usually does.  The Rich, Broke, or Dead defaults show that after 30 years there's roughly a 3% chance of having 5x your initial amount (all numbers adjusted for inflation), a 34% chance of having 2-5x your initial amount, and a 22% chance of having between 1-2x your initial FIRE amount.  That's about a 60% chance of having more than you FIREd with, even accounting for the effects of inflation.  For most people (at least in the U.S.), around the time you get to 30 years, S.S. will have kicked in, so even if you have a little less than what you FIREd with your actual income will be the same or higher - and that's even if you didn't make any adjustments to your income or spending as you saw you FIREd into bad times.

I've been familiar with FIRE and the 4% rule and all the statistics you two are quoting for about 30 years.  The "By the way" beginning of my quoted paragraph above was a mostly offhand remark to attempt to clarify the other poster's understanding.  It was also factually accurate as stated, although I left out any discussion of AA and the inherent optimism of the 4% rule in practice, which I also share.

My key point (first paragraph, snipped above) was to advocate against "ignorance is bliss" as a wise strategy.  Know the statistics, then decide, rather than make rough approximations, bury your head in the sand, cross your fingers, and hope everything works out OK.  Although after thinking about it, I suspect it's just a personality difference in terms of "planners" vs "happy go lucky".  And of course I'm glad it worked out for the other poster.

[FIREin2018]

My key point (first paragraph, snipped above) was to advocate against "ignorance is bliss" as a wise strategy.  Know the statistics, then decide, rather than make rough approximations, bury your head in the sand, cross your fingers, and hope everything works out OK.  Although after thinking about it, I suspect it's just a personality difference in terms of "planners" vs "happy go lucky".  And of course I'm glad it worked out for the other poster.

To be fair, when I Fired I didn't know my 4% plan was actually an 'ignorance is Bliss' plan.

But 6yrs later and more $ than what I started with, I think I'm passed Sorr.
Now what else should I look out for?

And yes, I lucked out with both more $ and not stressing over the COVID stock market drop

[cannotWAIT]

I'm not doubting the veracity, but am genuinely curious as to how people are racking up 6-figure medical bills. Did you need treatment that was not covered by insurance? Did something go wrong with insurance coverage/billing?

[secondcor521]

But 6yrs later and more $ than what I started with, I think I'm passed Sorr.

Maybe.  Based on what, though?  Gut feel?  How things worked out for someone else?  A Tiktok short?

Now what else should I look out for?

Possibly the RMD/SS tax torpedo in your late 70s.  Or possibly tax humps and cliffs like the 27% phantom bracket, IRMAA, ACA phaseouts.  Dementia, maybe (I say this for everyone generally, not you specifically).

[Wolfpack Mustachian]

<snip>
By the way, the 4% rule as generallly understood doesn't mean your portfolio grows.  Roughly, a 4% WR is 95% historically likely to have more than $0 left at the end of a 30 year period.  It is not designed to result in a portfolio that is preserved, let alone one that grows.  Yes, that's what happened in your case and in mine, but those unlucky historical patches (like the late 1960s) would result in depleting or nearly depleting a portfolio with a 4% WR.

It's not designed to grow it, but it very often does. I believe it's roughly 75% of the time it either grows or at least doesn't decrease. Not disagreeing with the letter of what you said, but the tone feels a little more pessimistic than reality. Yes, the 4% was about being greater than 0, and no, you're not guaranteed to grow, but using the 4% rule, you would have grown your portfolio in many cases. I.e. it's not surprising their portfolio grew or some rare exception.

+1 to @Wolfpack Mustachian 's comment.  While the 4% rule doesn't necessarily mean that your portfolio will grow, it is so incredibly conservative that if you FIRE into just an average economic situation your money will grow.  And if you FIRE into an above average environment it will grow a whole f'ing lot!  Only if you FIRE into the worst 5% or so of environments will your money run out after about 27-30 years or so, and only then if you're completely oblivious to what's happening or unable/unwilling to do anything about it.  If you FIRE into a bad time (but not the worst 5-10% or so times), then you should have close to what you FIRE'd with (in real terms), maybe a little more or a little less.  But at that point it's likely that S.S. will have kicked in to supplement your income.  And in that case you probably either increased your income or cut back on expenses, meaning you probably still have as much in real terms as when you FIREd. 

So while the 4% rule doesn't necessarily say that your 'stache will grow over time, in practice it usually does.  The Rich, Broke, or Dead defaults show that after 30 years there's roughly a 3% chance of having 5x your initial amount (all numbers adjusted for inflation), a 34% chance of having 2-5x your initial amount, and a 22% chance of having between 1-2x your initial FIRE amount.  That's about a 60% chance of having more than you FIREd with, even accounting for the effects of inflation.  For most people (at least in the U.S.), around the time you get to 30 years, S.S. will have kicked in, so even if you have a little less than what you FIREd with your actual income will be the same or higher - and that's even if you didn't make any adjustments to your income or spending as you saw you FIREd into bad times.

I've been familiar with FIRE and the 4% rule and all the statistics you two are quoting for about 30 years.  The "By the way" beginning of my quoted paragraph above was a mostly offhand remark to attempt to clarify the other poster's understanding.  It was also factually accurate as stated, although I left out any discussion of AA and the inherent optimism of the 4% rule in practice, which I also share.

My key point (first paragraph, snipped above) was to advocate against "ignorance is bliss" as a wise strategy.  Know the statistics, then decide, rather than make rough approximations, bury your head in the sand, cross your fingers, and hope everything works out OK.  Although after thinking about it, I suspect it's just a personality difference in terms of "planners" vs "happy go lucky".  And of course I'm glad it worked out for the other poster.

I completely agree that what you said was factually accurate. I know you have a ton of knowledge about this stuff from your previous posts. You probably know a lot more about it than I do.

All I was looking to do was to point out that the tone as I read it was that if you follow the 4% rule, in general, it's very possible to come close to running out. Although it was designed to check and make sure you wouldn't run out, the data shows that you have a really good chance to actually break even or make more even while living on it. Ending up even close to zero is a rarity. I just think they needs to be emphasized.

[FIRE 20/20]

<snip>
By the way, the 4% rule as generallly understood doesn't mean your portfolio grows.  Roughly, a 4% WR is 95% historically likely to have more than $0 left at the end of a 30 year period.  It is not designed to result in a portfolio that is preserved, let alone one that grows.  Yes, that's what happened in your case and in mine, but those unlucky historical patches (like the late 1960s) would result in depleting or nearly depleting a portfolio with a 4% WR.

It's not designed to grow it, but it very often does. I believe it's roughly 75% of the time it either grows or at least doesn't decrease. Not disagreeing with the letter of what you said, but the tone feels a little more pessimistic than reality. Yes, the 4% was about being greater than 0, and no, you're not guaranteed to grow, but using the 4% rule, you would have grown your portfolio in many cases. I.e. it's not surprising their portfolio grew or some rare exception.

+1 to @Wolfpack Mustachian 's comment.  While the 4% rule doesn't necessarily mean that your portfolio will grow, it is so incredibly conservative that if you FIRE into just an average economic situation your money will grow.  And if you FIRE into an above average environment it will grow a whole f'ing lot!  Only if you FIRE into the worst 5% or so of environments will your money run out after about 27-30 years or so, and only then if you're completely oblivious to what's happening or unable/unwilling to do anything about it.  If you FIRE into a bad time (but not the worst 5-10% or so times), then you should have close to what you FIRE'd with (in real terms), maybe a little more or a little less.  But at that point it's likely that S.S. will have kicked in to supplement your income.  And in that case you probably either increased your income or cut back on expenses, meaning you probably still have as much in real terms as when you FIREd. 

So while the 4% rule doesn't necessarily say that your 'stache will grow over time, in practice it usually does.  The Rich, Broke, or Dead defaults show that after 30 years there's roughly a 3% chance of having 5x your initial amount (all numbers adjusted for inflation), a 34% chance of having 2-5x your initial amount, and a 22% chance of having between 1-2x your initial FIRE amount.  That's about a 60% chance of having more than you FIREd with, even accounting for the effects of inflation.  For most people (at least in the U.S.), around the time you get to 30 years, S.S. will have kicked in, so even if you have a little less than what you FIREd with your actual income will be the same or higher - and that's even if you didn't make any adjustments to your income or spending as you saw you FIREd into bad times.

I've been familiar with FIRE and the 4% rule and all the statistics you two are quoting for about 30 years.  The "By the way" beginning of my quoted paragraph above was a mostly offhand remark to attempt to clarify the other poster's understanding.  It was also factually accurate as stated, although I left out any discussion of AA and the inherent optimism of the 4% rule in practice, which I also share.

My key point (first paragraph, snipped above) was to advocate against "ignorance is bliss" as a wise strategy.  Know the statistics, then decide, rather than make rough approximations, bury your head in the sand, cross your fingers, and hope everything works out OK.  Although after thinking about it, I suspect it's just a personality difference in terms of "planners" vs "happy go lucky".  And of course I'm glad it worked out for the other poster.

Thanks for the comments, and if I misunderstood or took you out of context, I apologize.

[tj]

We are approaching 5 yrs since I retired at 50.  Our stache is "only" 27% higher than when I retired.  We plan to sell our townhouse and buy a single family home within the next year.  I suspect we will have to pull some of the stache to make that transition. 

Like many on this forum, we never planned to blindly follow the 4% "rule".  I will probably start collecting my pension next year and I will eventually start collecting SS. These will reduce our withdrawal requirements.  SORR is certainly still a real concern for us. When will we get to the end of SORR risk?  I have no idea, but I certainly don't feel we have reached that milestone yet. 

Do I regret retiring early? Nope.

Is there a reason you're shifting from a townhouse to SFH?

[bmjohnson35]

We are approaching 5 yrs since I retired at 50.  Our stache is "only" 27% higher than when I retired.  We plan to sell our townhouse and buy a single family home within the next year.  I suspect we will have to pull some of the stache to make that transition. 

Like many on this forum, we never planned to blindly follow the 4% "rule".  I will probably start collecting my pension next year and I will eventually start collecting SS. These will reduce our withdrawal requirements.  SORR is certainly still a real concern for us. When will we get to the end of SORR risk?  I have no idea, but I certainly don't feel we have reached that milestone yet. 

Do I regret retiring early? Nope.

Is there a reason you're shifting from a townhouse to SFH?

Because my spouse does not like living in a townhouse. I wish she did, because it's a great neighborhood and low cost of living. It was our first and likely our last townhouse. 

[Turtle]

I'm not doubting the veracity, but am genuinely curious as to how people are racking up 6-figure medical bills. Did you need treatment that was not covered by insurance? Did something go wrong with insurance coverage/billing?

Not all insurance includes a max out of pocket cap.  Some insurance has a cap on what they will pay. 

It doesn’t need to be disease or lifestyle related illness either.  In the USA, it’s easier than people realize to “wrong place/wrong time” yourself into a 6 figure bill.  Gunshot wound for example.  Or even a slip and fall head wound that requires a lengthy hospital stay.  Those are a couple instances I’m aware of within my own extended family, and both were over a decade ago so I’m sure would be even more expensive now.

[mistymoney]

But 6yrs later and more $ than what I started with, I think I'm passed Sorr.

Maybe.  Based on what, though?  Gut feel?  How things worked out for someone else?  A Tiktok short?

what I've heard bantered around these parts is that once your portfolio doubles and your WR halves, you could easily weather a 50% market drop and that is when you are passed SORR.

https://www.in2013dollars.com/us/stocks/s-p-500/2018?amount=1000&endYear=2024
Stock market returns since 2018
If you invested $1000 in the S&P 500 at the beginning of 2018, you would have about $2,197.82 at the end of 2024, assuming you reinvested all dividends. This is a return on investment of 119.78%, or 13.06% per year.

Looks like retiring 6 years ago could have double even with withdrawals.

[FIREin2018]

But 6yrs later and more $ than what I started with, I think I'm passed Sorr.

Maybe.  Based on what, though?  Gut feel?  How things worked out for someone else?  A Tiktok short?

what I've heard bantered around these parts is that once your portfolio doubles and your WR halves, you could easily weather a 50% market drop and that is when you are passed SORR.

https://www.in2013dollars.com/us/stocks/s-p-500/2018?amount=1000&endYear=2024
Stock market returns since 2018
If you invested $1000 in the S&P 500 at the beginning of 2018, you would have about $2,197.82 at the end of 2024, assuming you reinvested all dividends. This is a return on investment of 119.78%, or 13.06% per year.

Looks like retiring 6 years ago could have double even with withdrawals.

Thx!
I thought 5yrs after Fire to get passed Sorr. Since this is my 6th year, I figured it's no longer a concern.

My portfolio hasn't doubled because it's not 100% sp500.
I have bonds and intl.
But it's up a few years worth of expenses and I'm ecstatic about that

[secondcor521]

what I've heard bantered around these parts is that once your portfolio doubles and your WR halves, you could easily weather a 50% market drop and that is when you are passed SORR.

It turns out that's a good - very conservative but good - rule of thumb.  Personally I think a 3% WR is probably bulletproof depending on the whole context.

I think it's just part of my personality to want to understand the "why?" of things, and to read the original data.  I see great advantages for me with this approach; there are also disadvantages.  The happy go lucky approach (the other poster) and the trust other folks (you) also have advantages, but the disadvantages of those approaches make them non-starters for me.