I have been thinking about a scenario where you cash out a portion of your savings as an insurance policy against future negative market returns in the first year of starting you SWR of 4%. I wanted to know the number (years of savings) required to get a 95% or greater success rate with the 4% SWR
For example, lets assume you need $100K per year for FI, as such that would require $2.5 million invested in the stock market (assuming a 4% SWR).
In your opinion; How much additional years of savings in cash (above the $2.5 million in stock accounts) would it require to survive negative market downturns? Meaning, whenever the market returned a significant negative number (more than -5%) you use the cash for those years.
My intuition tells me an additional 5 years of cash ($500K) would most likely be a sufficient safety net... which means about $3 million in net assets to start FI.
Yes, I know the numbers say just put that money in the market, and in most cases you will do better in the long run. I am not looking for maximum returns, I looking for an reasonable insurance policy against negative market return years. Also, lets leave bonds out of the picture for now. Lets assume the Vanguard Total Stock Index fund and a cash account that yields 2% APR.