Yeah, yeah SugarMountain, I thought the same thing in 2011, and in 2013, and in 2015... ;) Even MMM published that the market was due for a fall in June 2017 and May 2013...
Investments: Everyone is speculating vigorously on stocks, and the index is at a high valuation. You’ll want to continue your regular investing program, but your asset allocation rules will automatically make you buy fewer stocks and more bonds. And especially look into alternatives like paying off your mortgage early – this is the time to get out of debt, because the getting is easy.
I liked what Buffett had to say this week, that US company valuations are high but the alternative of investing in bonds at 3% for 30 years or real estate in general isn't a favorable alternative.
And you might not have been wrong in 2011, 2013, or 2015. We'll know in 20 years.
And I get what Buffett is saying. It's kind of like "Democracy is a terrible way to run a country. But, it's better than all of the alternatives." I'm not saying that stocks aren't the way to go. I think my current allocation is like 70% stocks, 10% bonds, 10% cash (sold a bunch of options last month, need to reinvest them), 10% real estate.
My point is simply that if with this recent run up in the market if you've suddenly hit the magic 4%, I'm not completely convinced it's real. In 1999, the S&P hit like 1515. It took until 2013 for it to get back there. That's 14 years with the only return being from dividends and many years where you had negative returns so if you're selling it's killing your portfolio.
If you look at cape-shiller and cfiresim together, you can see where say a 40 year retirement failed using straight 4% inflation adjusted WR several times. The worst times to retire were 1929 (made it, barely), 1937 (made it barely), 1966 (failed after 23 years), 1965 (failed after 25 years), etc. Don't know about 1999 yet or today obviously.
C/S
1929 - 32.4. All time high until 1999 (and again now).
1937 - 22. Highest peak between 1929 crash and the 60s.
1966 - 24. Highest peak between 1929 and 1999.
1965 - 22.3. Just under the 1966 peak.
We're currently over 33, 2nd highest ever to 1999.
Now, I don't think Cape Shiller is the be-all-end-all of market valuation measures, and I also think accounting changes in the 2000s to reporting earnings, and the shift from dividends to stock buybacks have an effect. But there is a correlation between high C/S valuation and risk of retirement failure. So, I would be very leery of doing a long RE right at 4% without plans for cutting spending/getting some additional income with today's valuation.
I'm also way more cautious than many on this board and am currently OMMing it even though my WR would be about 3.4%. But, remember that the Trinity study determined that with a 4% starting withdrawal rate was only 95% successful and I bet every one of the failure cycles started in a year with a cape shiller over 22.