wow.. so i should go more aggressive with a 50% US/25% intl/25% bond mix?
perpetual withdrawal rate- the maximum withdrawal rate that would have sustained the original inflation-adjusted principal even for the unlucky retiree starting at the worst possible time.
with a 50/25/25 mix, my safemax withdraw rate is 4.3% meaning if i never withdraw more than 4.3% of my portfolio in any year then i have a 95% chance of it lasting 40years but it might be $1 left.
My perpetual withdrawal rate is 3.8% meaning if i never withdraw more than 3.8% of my portfolio in any year, i have a 95% chance of still having my initial principal after 40years???
Holy WOW... 0.5% makes that huge of a difference?
In a word, yes.
In other words, it's more complicated than that and highly depends on exactly your circumstances, risk strategies, spending flexibility, capacity to generate income if needed, and desire to stay in your job.
A lower withdrawal rate just means saving significantly more than the 4% rule calls for. This may be a totally reasonable option for you if you enjoy your full time job and don't mind sticking around to save more than 25X your projected retirement spend.
Hell, if you love your job, why not save 50-75X???
Also, how are you defining your retirement spend? That number is entirely made up. You imagined it and loosely based it on figures that you expect to be true, but it isn't a real number.
Is that number bare bones projected expenses? Or does that number also have some padding on it to account for travel, incidentals, etc?
If that number is heavily padded, then your 4% is already very conservative, because any given year, you could drop your spending down to 2-3% if needed.
What should your AA be now, nearing retirement, during early retirement, during later retirement???
Who knows!
Again, that depends on your circumstances. That depends on how much buffer you built into your annual spend budget, how flexible your lifestyle is, if part of your savings is a pension, real estate, a side hustle, etc
You will read endlessly here about sequence of returns risk (SORR), and you could definitely time it to up your bonds in a "bond tent" during your most vulnerable years to avoid SORR, or you could stategize to spend your most vulnerable years spending much less through geo-arbitrage, or by pulling in some part time income to minimize early withdrawals.
Or you could do both...depends on what you enjoy doing and what your actual goals are.
I mentioned loving your job earlier and having padding on your annual spend, but what if you hate your job and have saved enough for a very bare bones 25X, or what we call a Lean-FIRE?
Should you stick it out at your hated job to pad that 'stache to get a 3.8% withdrawal rate? Cuz then you have 100% success rate, right???
Not exactly.
You still made up your retirement numbers. You still have no idea what you may end up needing to spend, and your annual spend budget is still super lean and doesn't account for unexpected expenses.
So, how long should you stay in this job that you hate???
How much is actually safe???
WHO KNOWS! IT'S ALL IMAGINARY NUMBERS ANYWAY.
Okay, so you hate your job, you have 25X lean spend saved and you really want to quit, but can't because you haven't saved enough for FIRE success, and don't forget the dreaded SORR.
Not so fast...
You hate your job.
Staying in it means trading the guaranteed risk of having to work a job you hate vs the risk of running out of money.
Hmm...
Personally, I think that if you hate your job you should quit and do something else. You could easily quit at 25X/lean FIRE, and do some part time work, consulting, whatever, and let your stache grow on its own to mammoth fat-FIRE proportions.
OR
You could quit as soon as you reach FU-money stage, which is also a self-defined and made up number, meaning, you could quit once you've saved enough money to feel comfortable to quit, let that sum grow over time, and pursue work you enjoy.
Hell, you could quit at 15X, go full on nomad for 10 years doing house/pet sitting around the world while picking up off jobs or writing and making enough to live on, and then end up with more than enough to retire on AND have developed the skill of living on extremely little as a nomad.
OR
You could quit your job with FU money (whatever that amount is) and start a business that you've always wanted to do, or become a doctor, or whatever big goal you always had that you never pursued for whatever reason. Then save your 50-75X because you are now doing what you love, if that's your thing.
What's the point of this long-ass diatribe?
Well, it's that it's incredibly important to remember that the 4% rule, SORR, cFIREsim, Big ERN, and all of the endless threads here about the various mathematical models and what they mean:
they are all REAL MATH DONE WITH MADE UP NUMBERS.
So, what should you, personally do?
You should read A LOT.
You should reflect deeply and personally on what happiness means to you, what role work plays in that happiness, what role money plays, analyze what risk actually means to you personally, and learn to utilize the brilliant math tools available to coordinate the numbers with your deeply personal values.
At the end of the day, money isn't anything in and of itself. Unless it is used, it is utterly meaningless to your life. It is simply a placeholder for time and energy.
Time and energy do not have static values either. 8 hours of time and back breaking energy at 19 is very different from its value at 75.
This means, your relationship with money will always be changing depending on the circumstances of your life. The value of time changes if you get diagnosed with terminal cancer. The value of energy changes if you have an illness that causes fatigue and weakness, or if you have triplets.
You cannot predict the money/time/energy exchange of the future, only for today.
In the end, make your plans, do your math, but don't get too distracted by virtually undefinable numbers because what this is all about is maximizing happiness.
Yep...it looks like math on paper, but really, all of these calculations are actually just about the nebulous concept of happiness.
If you never forget that, you will manage to figure out what plan is best for you, and how to pivot along the way as things change.
Enjoy your reading.