Being an Australian, it interests me that:
- Our stock market has higher average returns than the US stock market over the past x years - I can't remember off hand what it is, but let us say that we get 2% more on average
- Despite this, our SWR rate is less than the US - 3.6% as against 3.9% (I think) - this is because of one series of bad years in the 1970s that we had, but the US didn't
- Looking at the SWR rates for other countries, and the reasons behind them, most are worse than the US, and most are for a similar reason - there was one (singular) horrible series of bad years
As a result, I think that basing your future planning on the reasonable SWRs for the US is a little speculative, especially when things are changing. Within a short time, and certainly for most of the next 50 - 60 years
- China is going to dominate the world market - taking over from the US in - 10? 15? years
- Oil will be in decline (having peaked in the last few years)
- The technology revolution has not finished, with massive changes just about to start in world transportation networks etc. and are underway in employment
These things are all going to change the economics underpinning world trade. The last 100 years are probably not a reasonable predictor of the coming 50 to 60 years. A lot of the past 100 years were about nationhood with old empires (British, Ottoman, other European, USSR/communist) breaking up. All of Africa was colonies 100 years ago, as was India.
Also, we all have longer retirement expectations than we think. In Australia we have one of the highest life expectancies in the world, not much more than the US, but it is 84 for women and 79 for men. Couples who reach retirement age can expect one member to reach 95! In Australia, even people who have a comparatively late ER of 50 should be looking toward to a 45 year retirement time frame. These figures are only a couple of years less for the US. And that doesn't include people who, like me, have relatives who have lived to 106. When I was in primary school we were told that average life expectancy was 69.
The other problem is that the last 8 years of life tend to be expensive because of declining health. These are also the years we need to have some sort of autopilot - because we may not be up to looking after our own finances when we have declining health.
I expect that the only reasonable way to deal with all this is to do as some people have suggested - live off your income. And to be flexible. And to diversify.
