scarcity mindset

[BeanCounter]

Both the scarcity mindset and the wealth maximization mindset represent a failure to move on from one set of solved problems to a higher level of meaningfulness.

Spot on.

Nereo has a quote from me in his signature "You can't Boglehead your way to total financial security," which is not a statement saying that you can never have enough money, it's that you need to find a way to live a full and happy life despite the fact that you cannot buy total financial security.

The answer to the impossibility of total financial security isn't more money, it's the ability to cope with the normal risks of life and to be able to find meaning and happiness within a fundamentally risky existence.

Having emergency supplies in your home and car are both good things, being a paranoid prepper isn't just a better version of being reasonably prepared.

There is no black and white answer as to when caution escalates from protective to damaging, but the proof of the pudding is in the eating. If what you are doing isn't making you happy with your life, something is off. And if collecting more money isn't solving the problem, then even more money isn't likely the optimal solution.

This is great too.

[Ron Scott]

Both the scarcity mindset and the wealth maximization mindset represent a failure to move on from one set of solved problems to a higher level of meaningfulness.

Spot on.

Nereo has a quote from me in his signature "You can't Boglehead your way to total financial security," which is not a statement saying that you can never have enough money, it's that you need to find a way to live a full and happy life despite the fact that you cannot buy total financial security.

The answer to the impossibility of total financial security isn't more money, it's the ability to cope with the normal risks of life and to be able to find meaning and happiness within a fundamentally risky existence.

Having emergency supplies in your home and car are both good things, being a paranoid prepper isn't just a better version of being reasonably prepared.

There is no black and white answer as to when caution escalates from protective to damaging, but the proof of the pudding is in the eating. If what you are doing isn't making you happy with your life, something is off. And if collecting more money isn't solving the problem, then even more money isn't likely the optimal solution.

This is great too.

The ability to cope with the normal risks of life and to be able to find meaning and happiness within a fundamentally risky existence is a wonderful ability to have.

Such a person is also likely to be wise enough to grapple earnestly with the probably of various risks and strive to achieve a truly robust level of financial independence before retiring.

I may be a faster runner than you, but I still won’t tease the bear.

[Metalcat]

Both the scarcity mindset and the wealth maximization mindset represent a failure to move on from one set of solved problems to a higher level of meaningfulness.

Spot on.

Nereo has a quote from me in his signature "You can't Boglehead your way to total financial security," which is not a statement saying that you can never have enough money, it's that you need to find a way to live a full and happy life despite the fact that you cannot buy total financial security.

The answer to the impossibility of total financial security isn't more money, it's the ability to cope with the normal risks of life and to be able to find meaning and happiness within a fundamentally risky existence.

Having emergency supplies in your home and car are both good things, being a paranoid prepper isn't just a better version of being reasonably prepared.

There is no black and white answer as to when caution escalates from protective to damaging, but the proof of the pudding is in the eating. If what you are doing isn't making you happy with your life, something is off. And if collecting more money isn't solving the problem, then even more money isn't likely the optimal solution.

This is great too.

The ability to cope with the normal risks of life and to be able to find meaning and happiness within a fundamentally risky existence is a wonderful ability to have.

Such a person is also likely to be wise enough to grapple earnestly with the probably of various risks and strive to achieve a truly robust level of financial independence before retiring.

I may be a faster runner than you, but I still won’t tease the bear.

And if you read enough of my posts you will see how strongly I advocate for back-up plans, hedges, and resiliency.

In no way am I saying that people shouldn't worry about risk, just that some level of concern is highly productive, but that doesn't mean that more worry is better.

We have FAR more folks here who worry excessively despite being hedged up to their eyeballs* than folks who don't worry enough.

*sub 3% WR, paid off house, bond tent, cash reserve, and a budget with so much fat that they could easily cut 30%. This is several times more common here than folks who have retired on 4%.

[BeanCounter]

that doesn't mean that more worry is better.

I could use this on a cross stitch.

[reeshau]

This is very close to Nassim Taleb's definitions of fragile and antifragile:

"fragility—which had been lacking a technical definition—could be expressed as what does not like volatility, and that what does not like volatility does not like randomness, uncertainty, disorder, errors, stressors, etc."

"And antifragility flows—sort of—from this explicit definition of fragility. It likes volatility et al. It also likes time. And there is a powerful and helpful link to nonlinearity: everything nonlinear in response is either fragile or antifragile to a certain source of randomness."

And going on more about randomness:

"The Extended Disorder Family (or Cluster): (i) uncertainty, (ii) variability, (iii) imperfect, incomplete knowledge, (iv) chance, (v) chaos, (vi) volatility, (vii) disorder, (viii) entropy, (ix) time, (x) the unknown, (xi) randomness, (xii) turmoil, (xiii) stressor, (xiv) error, (xv) dispersion of outcomes, (xvi) unknowledge."

"Why item (ix), time? Time is functionally similar to volatility: the more time, the more events, the more disorder. Consider that if you can suffer limited harm and are antifragile to small errors, time brings the kind of errors or reverse errors that end up benefiting you. This is simply what your grandmother calls experience. The fragile breaks with time."

I really liked the inclusion of time with a list of words that generally have negative connotations.  There are so many questions around the lines of "yeah, but does the 4% rule work for x years?"  As if having more time in independence is bad; that taking this nontraditional path still means you are issued your rocking chair at your going away party.

[Ron Scott]

There are so many questions around the lines of "yeah, but does the 4% rule work for x years?"  As if having more time in independence is bad; that taking this nontraditional path still means you are issued your rocking chair at your going away party.

FIRE doesn’t imply looser standards for determining your financial independence.

[reeshau]

There are so many questions around the lines of "yeah, but does the 4% rule work for x years?"  As if having more time in independence is bad; that taking this nontraditional path still means you are issued your rocking chair at your going away party.

FIRE doesn’t imply looser standards for determining your financial independence.

I fully agree.  And, I'm not sure I see where you come to that conclusion.

My point is, with a risk / volatility averse mindset, focused on the worst case (and what the 4% rule is named to frame) a longer timeframe does--slightly--reduce your chances of not going bust.  But, your expected value, for anything 50/50 stocks or better, is many multiples higher, because you add more decades to the time you are compounding more than spending + inflation.

The narrow focus on the absolute worst case, without any understanding of alternatives or context, risks robbing many people of years or decades of doing what they want.

[Ron Scott]

There are so many questions around the lines of "yeah, but does the 4% rule work for x years?"  As if having more time in independence is bad; that taking this nontraditional path still means you are issued your rocking chair at your going away party.

FIRE doesn’t imply looser standards for determining your financial independence.

I fully agree.  And, I'm not sure I see where you come to that conclusion.

My point is, with a risk / volatility averse mindset, focused on the worst case (and what the 4% rule is named to frame) a longer timeframe does--slightly--reduce your chances of not going bust.  But, your expected value, for anything 50/50 stocks or better, is many multiples higher, because you add more decades to the time you are compounding more than spending + inflation.

The narrow focus on the absolute worst case, without any understanding of alternatives or context, risks robbing many people of years or decades of doing what they want.

We seem to agree philosophically that FI is important and people should set high standards for determining the level of savings they need personally need to achieve it.

We disagree on how such a determination should be made. I personally don’t believe the 4% rule is based on sound statistics and logic. I would not rely on the data or the tables published using that data for planning my retirement.

[reeshau]

There are so many questions around the lines of "yeah, but does the 4% rule work for x years?"  As if having more time in independence is bad; that taking this nontraditional path still means you are issued your rocking chair at your going away party.

FIRE doesn’t imply looser standards for determining your financial independence.

I fully agree.  And, I'm not sure I see where you come to that conclusion.

My point is, with a risk / volatility averse mindset, focused on the worst case (and what the 4% rule is named to frame) a longer timeframe does--slightly--reduce your chances of not going bust.  But, your expected value, for anything 50/50 stocks or better, is many multiples higher, because you add more decades to the time you are compounding more than spending + inflation.

The narrow focus on the absolute worst case, without any understanding of alternatives or context, risks robbing many people of years or decades of doing what they want.

We seem to agree philosophically that FI is important and people should set high standards for determining the level of savings they need personally need to achieve it.

We disagree on how such a determination should be made. I personally don’t believe the 4% rule is based on sound statistics and logic. I would not rely on the data or the tables published using that data for planning my retirement.

Fair enough.  I didn't post it as my own personal standard.  I have read both Bengen's original work and the Trinity study, directly.  But, my point was the question gets asked here (and elsewhere) often about "the headline" with only a shallow understanding of what it means.  Maybe we agree more than you think.

One of my prime touchstones in discussions like this:  "All models are wrong.  Some are useful." -- George E. P. Box

[Ron Scott]

There are so many questions around the lines of "yeah, but does the 4% rule work for x years?"  As if having more time in independence is bad; that taking this nontraditional path still means you are issued your rocking chair at your going away party.

FIRE doesn’t imply looser standards for determining your financial independence.

I fully agree.  And, I'm not sure I see where you come to that conclusion.

My point is, with a risk / volatility averse mindset, focused on the worst case (and what the 4% rule is named to frame) a longer timeframe does--slightly--reduce your chances of not going bust.  But, your expected value, for anything 50/50 stocks or better, is many multiples higher, because you add more decades to the time you are compounding more than spending + inflation.

The narrow focus on the absolute worst case, without any understanding of alternatives or context, risks robbing many people of years or decades of doing what they want.

We seem to agree philosophically that FI is important and people should set high standards for determining the level of savings they need personally need to achieve it.

We disagree on how such a determination should be made. I personally don’t believe the 4% rule is based on sound statistics and logic. I would not rely on the data or the tables published using that data for planning my retirement.

Fair enough.  I didn't post it as my own personal standard.  I have read both Bengen's original work and the Trinity study, directly.  But, my point was the question gets asked here (and elsewhere) often about "the headline" with only a shallow understanding of what it means.  Maybe we agree more than you think.

One of my prime touchstones in discussions like this:  "All models are wrong.  Some are useful." -- George E. P. Box

I often wonder why someone who actually does the 25x thing, REQUIRES ~4% of their invested assets a year to live for 30 years in retirement, and claims they want to spend their last dollar on the undertaker doesn’t simply annuitize it. Or most of it.

Putting your faith in the Trinity and supporting a constant spending plan with a volatile investment policy like 60-40 or even more aggressive (more volatile), seems inefficient and risky. At least with annuities you’re adding another valuable factor—the distribution of lifespans in the pool—to the payout.

I think George Box would agree annuities are a more useful model than 4%-and-fingers-crossed when model failures can be catastrophic.

[ChpBstrd]

There are so many questions around the lines of "yeah, but does the 4% rule work for x years?"  As if having more time in independence is bad; that taking this nontraditional path still means you are issued your rocking chair at your going away party.

FIRE doesn’t imply looser standards for determining your financial independence.

I fully agree.  And, I'm not sure I see where you come to that conclusion.

My point is, with a risk / volatility averse mindset, focused on the worst case (and what the 4% rule is named to frame) a longer timeframe does--slightly--reduce your chances of not going bust.  But, your expected value, for anything 50/50 stocks or better, is many multiples higher, because you add more decades to the time you are compounding more than spending + inflation.

The narrow focus on the absolute worst case, without any understanding of alternatives or context, risks robbing many people of years or decades of doing what they want.

We seem to agree philosophically that FI is important and people should set high standards for determining the level of savings they need personally need to achieve it.

We disagree on how such a determination should be made. I personally don’t believe the 4% rule is based on sound statistics and logic. I would not rely on the data or the tables published using that data for planning my retirement.

Fair enough.  I didn't post it as my own personal standard.  I have read both Bengen's original work and the Trinity study, directly.  But, my point was the question gets asked here (and elsewhere) often about "the headline" with only a shallow understanding of what it means.  Maybe we agree more than you think.

One of my prime touchstones in discussions like this:  "All models are wrong.  Some are useful." -- George E. P. Box

I often wonder why someone who actually does the 25x thing, REQUIRES ~4% of their invested assets a year to live for 30 years in retirement, and claims they want to spend their last dollar on the undertaker doesn’t simply annuitize it. Or most of it.

Putting your faith in the Trinity and supporting a constant spending plan with a volatile investment policy like 60-40 or even more aggressive (more volatile), seems inefficient and risky. At least with annuities you’re adding another valuable factor—the distribution of lifespans in the pool—to the payout.

I think George Box would agree annuities are a more useful model than 4%-and-fingers-crossed when model failures can be catastrophic.

Annuities are suddenly looking attractive again, especially for those who expect interest rates to drop and inflation to fall. Last time I looked at immediateannuities.com the payout was 6.22%. So if you put in $500k, you'd be guaranteed a $31,100 income for life. If you had another $500k invested in stock funds like VOO, SPY, or VTI, you'd make another ~$7,500/year on dividends alone. For a $40k (4%) annual withdraw, you'd be looking at selling maybe $2,500 worth of stock per year. You could probably generate that from selling covered calls!

This 4% WR scenario is tantalizingly close to full immunity to sequence of return risk, and there is lots of upside potential in having a pile of stocks with sub-1% annual withdraws for decades. The downside risk would be a long period of above-trend inflation, which would cause higher and higher stock withdraws. Still though, your overall spending would have to increase 43.75%, from $40k to $57,500, to even hit a 4% WR on the stock portion of your portfolio, assuming dividends stay flat. So you'd be watching trends for a decade rather than suddenly questioning your ability to retire after a flash crash.

Like I said, looking attractive. If high-grade, long-duration bonds weren't already yielding near 6% I might take the deal.

[Ron Scott]

I often wonder why someone who actually does the 25x thing, REQUIRES ~4% of their invested assets a year to live for 30 years in retirement, and claims they want to spend their last dollar on the undertaker doesn’t simply annuitize it. Or most of it.

Putting your faith in the Trinity and supporting a constant spending plan with a volatile investment policy like 60-40 or even more aggressive (more volatile), seems inefficient and risky. At least with annuities you’re adding another valuable factor—the distribution of lifespans in the pool—to the payout.

I think George Box would agree annuities are a more useful model than 4%-and-fingers-crossed when model failures can be catastrophic.

Annuities are suddenly looking attractive again

If high-grade, long-duration bonds weren't already yielding near 6% I might take the deal.

Yeah, that’s kinda the thing with annuities. They look good when the bond yields also look good. But that’s probably the best time to get one.

To be sure, I don’t own any and will not buy them. I only suggest them for people who otherwise would be attracted to the 4% Rule and don’t care about leaving inheritance to loved ones.

[ChpBstrd]

I often wonder why someone who actually does the 25x thing, REQUIRES ~4% of their invested assets a year to live for 30 years in retirement, and claims they want to spend their last dollar on the undertaker doesn’t simply annuitize it. Or most of it.

Putting your faith in the Trinity and supporting a constant spending plan with a volatile investment policy like 60-40 or even more aggressive (more volatile), seems inefficient and risky. At least with annuities you’re adding another valuable factor—the distribution of lifespans in the pool—to the payout.

I think George Box would agree annuities are a more useful model than 4%-and-fingers-crossed when model failures can be catastrophic.

Annuities are suddenly looking attractive again

If high-grade, long-duration bonds weren't already yielding near 6% I might take the deal.

Yeah, that’s kinda the thing with annuities. They look good when the bond yields also look good. But that’s probably the best time to get one.

To be sure, I don’t own any and will not buy them. I only suggest them for people who otherwise would be attracted to the 4% Rule and don’t care about leaving inheritance to loved ones.

The appeal of the annuity is that many of the corporate and agency bonds one would get for 6%+ are callable. That means when recession hits and the Fed lowers rates to 2-3%, many of those bonds (the ones where the debtor is not in trouble!) get paid out at par and suddenly you're reinvesting at 4%. The annuity would deliver 3-5% real returns in such a scenario and would not be callable. Additionally, the tax treatment for someone living off the payments might be beneficial.

[Ron Scott]

Retirees who live frugally with respect to their capacity to spend should probably not pay the sellers’ commissions built-in to annuities and invest for themselves. Probably more an opinion than a rule tho.