Is it just me, or are people here *overly* cautious about FIREing?

[Monkey Uncle]

Yeah, good stuff.  Really cool way to look at it if you're looking at it from the beginning.  For me, I do this kind of roughly, though not working backwards like you have, but forward, given current stash and savings rate and expected future pension + SS income. For me it looks roughly like this:

From retirement at 54 until 62, I will get FERS pension + SRS, totaling somewhere between $65k - $75k (depends on pay raises/adjustments over the next three years which will be my "high-3").  Current expenses, not including Fed taxes, is around $65k.  So using a tax calculator, I figure I need @$79k pre-tax (I won't pay state taxes on my pension in my state).  I plan to be working at a hobby job (am already doing it PT on weekends now) and earning $5k-$10k/year.  Depending on how that works out, I'll either need to withdraw some or none from my TSP.  But even if I took the entire shortfall from my TSP (worst case), it will be somewhere between $5k - $15k.  On an expected $800K portfolio (currently at $525k, with $31k annual additions going forward), that's anywhere from a 0.6% to 1.9% draw.  So I use the worst case.

At 62, the SRS ($10k - $12k) goes away.  So withdrawals from TSP would increase to cover shortfall, in order to hold off on taking SS until FRA (or possibly 70). Conservative estimate is that after 8 years of these low withdrawals, my TSP should be anywhere from $1.02M - $1.3M. Withdrawals then at age 62 of $17k - $22k from the lower figure ($1.02M) would only be 1.6% - 2.2%).  Again, account continues to grow another 5-8 years when I hit FRA or 70, at which point, I'm getting $25k - $32.5k from SS (today's dollars; if I discount to 77% it's $19k - $25k), which significantly lowers the TSP draw -- though RMD's will kick in then.  But I should be pretty flush with cash.

If I spend less than I do now (which statistically is the case) and/or investments yield better than 6% going forward  (historically the case), the numbers look even rosier.  But I really try to be conservative in these projections.  Either way, pretty sure I don't have to work again ever after 54.  And yet there's still that nagging little scintilla of doubt in the back of my mind!

Dude, you are fuckin' set.  And you still have a scintilla of doubt?

[Monkey Uncle]

Is anyone else reading this and thinking "This is exactly what what the OP is talking about regarding people being uber-conservative!"

...snip...

My other criticism is that the 4% rule ALWAYS applies, not just after your kids and mortgage are gone.  As long as you know your spending you know how much 'stache you need. 

Leaving out goldie's personal spending choices, this calculation helps reduce uber-conservatism. Say I want to retire today with 24,000 per year. Using the 4% rule, I need $600,000.

Doing it goldie's way but using the same $24,000 per year for all phases to compare apples to apples:
Phase 1 will be 15 years we'll use a conservative 3% real return rate to reduce chance of failure.
Today I need $286,500 for Phase 1.

Phase 2 another 15 years of 24K per year, this time using 4% real return: I'll need 266,800 in 15 yrs or $148,300 today for Phase 2.

Phase 3 starts in 30 years and lasts until death. Using the 4% SWR rule, I will need $600,000 at that time. Assuming that a 5% real return over 30 years is reasonable, today I only need $138,800 for Phase 3.

So I can actually retire with only $573,600 today and still enjoy an annual income of $24,000. 

Of course doing it this way you lose out on some safety net, so you would want to be sure to keep your 3 pots (Phases) separate in your accounting. If your Phase 1 pot wasn't growing at 3% between withdrawals, you would adjust spending or start a side-hustle. You wouldn't dip into other Phase 2 or 3 pots without understanding that you are then compromising those Phases.

Not as simple as the 4% rule maybe, but for those who are happy to pay attention (as long as it means they can retire sooner) it's great!

The main benefit of this calculation, though, is that many of us don't consider our changing needs/wants over time when we calculate our FIRE number as 25x expenses.  This method asks for more detail which is bound to return a more accurate (and probably lower) figure.

As Sirdoug pointed out, the big flaw in this method is the assumption of smooth returns, especially during the first decade or so.  It probably would be better to stick with cFiresim, which is capable of accounting for different spending levels over time and supplemental sources of income like SS and pensions, all while still modeling sequence of return risk.  The drawback is that it can't deal with a changing portfolio allocation over time (or at least I don't recall such a feature...correct me if I am wrong).

[Metta]

I definitely consider decreased spending as I age, risks strategy, and government income when I think of the 4% rule.  I also consider 4% as the rule if you want your money to only last 30 years, 40 years with income fluctuation..

I break down my FIRE like this; 

Phase 1 -- kids living at home  (maybe until the youngest is 20) -- 4% rule does not apply,  need to save up cash to fully fund this phase, on-going temporary contract / work part time is likely needed to ensure ramping up employment on 6 month notice is possible..  Expect cost surprises x 4 persons risk factors.

Phase 2 -- Age 50ish to 60 ish...  No gov't pension.   -- Again, savings strategy does not comply to 4% rule, rather a combo of anticipating DH's modest income and living off savings.    Ability to sell nearly paid for home and downsize in a tremendous down market if choose not to re-income ourselves.  OR - rent out rooms, etc.

Phase 3 -- Age 60 ish to 75is-- gov't income, home paid off, less costs.  SWR of 4% rule applies.
More travel in good years, less spend in bad years.    Need to asset allocate to have at least 3 years in fixed income or cash like accounts to smooth out downfall, especially at start.

Phase 4 - Age 75ish up -- 4% SWR applies.  less spending overall.  Gov't pension sufficient to carry us through if market totally tanks....extra money, if any, spent lavishly on family vacations with grandkids.


Each phase has a different spend / savings number...  I have accomplished my savings needed for phase 2. 3. 4. and working on 1 right now.

The one more year challenge, for me, is DH who sees us finally entering our "Golden Years of Spending"...  (don't get me started.....)

I am not near FI yet and my DH does not really want to FIRE; he wants to work until at least 55 (and maybe more). I like your phased approach Goldielocks. I think I need a plan like this because our situation is similarly complex (and we had kids late so by the time our youngest is 20, we will be 57 and 60, and hopefully long retired). Can you provide some examples of how you do the math for this? Even if it's with fake numbers, it would be super helpful for me.

This is how I approach it:

I work from Phase 4 backward, because I will have few options in Phase 4, other than living on less.  So, I want to secure the farthest out retirement portions first.  The magic of compound interest also means that Phase 4 and then Phase 3, are pretty easy to fund, if you get started when you are in your early 20's.

Phase 4 --

If my government benefits of CPP and OAS will provide my husband and I up to $22k per year, we will want to spend another $30k per year fun money / other expenses.   This is pretty generous for 75 yr to 95 yr, but could afford some nice private nursing supplement or respite caregiving.

At a 4% SWR, need to have $30k/0.04 =$750,000 at the start of Phase 4, or Age 75.
That is 32 years from now.
What amount of money do I need saved today in 2015 to have $750k at the age of 75?

Using my favorite, Excel.    Present Value Function.  I use 5% interest rate, which is IN ADDITION to inflation / year assumption of 3%.  e.g., I assume 8% total return rate, but I want to use current dollars to estimate income needed...

  = PV(rate, nper, pmt, fv, beg/end)
 = PV(0.05, 32, 0, -$750000,0)
PHASE 4 $ Required Today= $157,400.

Phase 3 -- Age 60 to 75  Travelling years not on a budget?
For various reasons, I have not broken this at 65, which is CPP benefits standard age, or 67, which is age for OAS. 
I want to have income of $60,000 per year, in addition to Government benefits adding up to $15,000 per year.   Very little taxes at these income rates, BTW.

Money needed to fund 15 years at $60,000, with the total invested at 4% moderate conservative asset mix, net of inflation.
How much money do I need at age 60 to fund $60,000/yr withdrawls at 4% net interest invested rate, leaving $0 at age 75 (when phase 4 kicks in?)

= PV(rate, nper, pmt, FV, beg/end)
=PV(0.04,15,-60000,0,0)
= $667,100 at age 60.

But wait -- how much do I need TODAY, to get $667,100 at age 60?   
Repeat the phase 4 calculation, with only 17 years to age 60, but the rate should be 5% average, again.

  = PV(rate, nper, pmt, fv, beg/end)
 = PV(0.05, 17, 0, -$667100,0)
PHASE 3 $ Required Today= $291,055

Phase 2 -- Age 50 to 60, DH working.

Desired income after tax is $75,000 per year, DH earning between $60,000 and $75,000 --> Average $55,000 after tax.  High income needed is because of mortgage.  grr.
He will probably make more, as he is just recently back in the workforce after 12 years out.  AND he therefore wants to work for a long time, as he likes his new career very much. (Robotics / Mechatronix)

Money needed to pull from savings:  $20,000 per year.
I will drop this back down to 2% interest, net, during the years of withdrawl I will asset allocate more conservatively.  You could split this into $60k as CASH buffer  and the remainder invested

Money needed at age 50, to last 10 years at 2% interest net of inflation...
=PV(0.02, 10, -$20000,0)
= $154,000

Money in today's dollars : (has 7 years to compound until age 50)... note, I am ok with more risk at 5% until I pull the trigger to use the money.
=PV(0.05, 7,-$154000,0)

PHASE 2 -- Money needed in today's dollars: =$109,754


Phase 1 -- for simplicity, a straight calculation, given short term.
We spend on expenses and cashflow (including accelerated mortgage which is principal), say $75000 per year. 

7 years x $75000 = 525000.
How much will come from employment (which is taxed?) -- Assume $50,000/yr of after tax dollars.
Required is therefore $175,000

 -- Where does the  money come from :  Tax deferred or tax paid accounts?
-- Let's assume it is tax paid accounts, like a ROTH or investment account.  (I could pull from my RRSP, because I don't need to wait until 59.5...  but others can't, and I am saving the RRSP for later anyway...)

Phase 1 $ Required today-- Need $175,000 in Cash.  Prefer lower taxed investments, such as dividends, but look at asset allocation best for you.  May be GIC's or other.


Totals -- needed today, in investments,   Phase 2, and 1 need to be in taxable accounts or I need more to pay for taxes.  Phase 3/4 the income is split and lower, so taxes are minor.

Phase 4 $157,400
Phase 3 $291,055
Phase 2 $109,754
Phase 1 $175,000


Total $733, 209


Now of course, this will vary widely depending on what spend rate my DH and I agree to, and how much part time work is captured in Phase 1 and Phase 2. How much tax rates vary from now to then, etc..

Also, using a 4% SWR starting at age 75 is a bit nuts (conservative) as I don't think we will live past 105 years. DOH!   But I would rather hedge to the conservative on far out numbers that I will have very little income alternatives for.  Changing it to 6% only drops TODAY's dollars by $88k.

To that end, I did not include estate legacy of my $, nor any inheritance that we will likely get, and have left the HCOL paid off house by age 60 as a separate  pool of money to be conservative.  With the workshop we have, likely DH will not want to move until he is done with it -- age 75 perhaps?

Thank you so much for sharing this! It is a different way of thinking than I used and very useful for me to run my numbers differently (and perhaps more thoughtfully).

[arebelspy]

Using the 4% rule, I need $600,000.
...
So I can actually retire with only $573,600 today

Doesn't seem like it really saved you much.  Maybe a few months of working?  For the added sequence of returns risk.

It's basically equivalent to a 4.2% WR.

I think the bucket model, as it's commonly referred to in ER circles, is a good way to think about your funds.  But it doesn't save you anything, it just shifts/compartmentalizes things.  It's six of one, half dozen of the other.

You should need the exact same amount to FIRE, you just break it down into what phases of your life you'll need parts of the portfolio.

[Metta]

I don't include SS in my stache or projected income, but that's because it's my "old age health needs" money.  I don't think that's conservative or overly cautious, just one way of dealing with old age health costs.  Will that cover everything old age?  Probably not.  Will it cover most things, especially when added to the "regular" stache?  Likely.

Another alternative smart strategy for doing the numbers. Thanks!

[mr_orange]

But that's the price you pay for growth of the community, I think.  The message is necessarily diluted by bringing in folks beyond your core target audience.

Why is it that you get to define who the "core target audience" is?  To me the audience should be the poorly-informed over-spenders from the narrative I have seen in my time here. 

Part of is just that people see frugality as a virtue, even when they are extravagantly wasteful, so they want to feel like part of this movement without actually participating.  People like londonbanker and mrpercentage should have retired a decade ago, yet continue to tell us how risky it is to retire on only $4 million.  Meanwhile our host and his predecessor both retired with well under a million dollars, and seem much happier about it than those wealthy forum participants who continue to fret about never having enough.  For some people, security will never come.

Perhaps. 

Or...perhaps they rationally wish to improve their lifestyle or the lifestyle of their family and descendants instead of "optimizing" the duration they have to trade their time for money working for someone else.  Or perhaps they like what they're doing and what is optimal for them is different than what is optimal for you or the cut-to-the-bone-is-the-only-way-to-optimize enthusiasts. 

[FrugalFan]

Using the 4% rule, I need $600,000.
...
So I can actually retire with only $573,600 today

Doesn't seem like it really saved you much.  Maybe a few months of working?  For the added sequence of returns risk.

It's basically equivalent to a 4.2% WR.

I think the bucket model, as it's commonly referred to in ER circles, is a good way to think about your funds.  But it doesn't save you anything, it just shifts/compartmentalizes things.  It's six of one, half dozen of the other.

You should need the exact same amount to FIRE, you just break it down into what phases of your life you'll need parts of the portfolio.

For me, it makes a huge difference, from having to have saved $235,000 in today's dollars vs 515,000 in today's dollars. The reason is that the initial retirement years will be most expensive because we won't be eligible for government benefits and our spending will be higher as our kids will still be at home. Then we will get a new influx of money after 5 years, 8 years, 12 years, and 15 years. Then our expenses will go down. To have enough for a 40% withdrawal in the first 5 years means needing to save a lot more, especially since the first 10 years seem to be really important in terms of success rates.

The drawbacks I see are that the government funding no longer acts as a security margin but is now required. I also think there is less chance of the portfolio growing to the point that it is too large to fail. However, we have some other safety margins, like the ability to sell our big house to a slightly smaller one in a different part of town for less than half the price, or moving to a lower cost of living area, or even picking up part-time work since these will be our youngest retirement years. Also we currently own a rental duplex and I have not incorporated any rental income in our retirement plans. The benefits include not needing to save nearly as much money, and not ending up with unnecessarily large portfolios.

For the drawdown phases, we could use the VPW method and use the suggested withdrawal percentages as the maximum we withdraw only if we need it (the goal wouldn't necessarily be to spend it down to zero but it could be a possibility if necessary). If we want to be even more conservative and assume that the money we spend in the drawdown phases won't earn anything above inflation during that time, we can save the entire amount in today's dollars, which only increases our total needed in today's dollars to $267,000.

[arebelspy]

If you have much reduced expenses later, or another income stream kicking in (like a pension), and you weren't counting either or both of those, yes, this way will speed it up, but I'd argue that's just an artifact of you using the 4% rule blindly without actually calculating what you need.

For example, let's say my annual spending in FIRE will be 30k, and I also have a mortgage that costs 20k/yr., but has 2 years left.  If I took my spending with the mortgage (50k) and multiplied it by 25 for the 4% rule, I'll have WAY more than I need, cause my actual spending is 30k (and I only have less than 40k total left on a mortgage that will end very soon).

Or (different example), if I spend 40k annually, but have a pension coming in a few years that covers 30k, I only need my stache to cover 40k for those few years, then needs to cover 10k after that.

That's not a problem with the 4% rule, just with my planning.

This method helps you think through that, to figure out what you need, but has its own flaws (the assumptions on return being the primary one).  Looking at your "buckets" is a good ER strategy, and quite common (you can find blog posts and books on it, even), but it isn't actually gaining you anything, other than perhaps a clearer look at something you may have missed without that different look.

A more nuanced year-by-year income/spending on something like cFIREsim would serve as well, and, I'd argue, be even better, as you can take into account sequence of returns risks, and find a number you're comfortable with.

If your spending is going to drop dramatically (as many people's do, as, say, kids graduate, etc.), plan it out with that tool much more precisely than the "pick a number I think will represent returns and inflation over that timeframe and hope I'm right."

[Landlord2015]

Have you wondered why people from Europe do not comment this unless they are very rich(millionaire)?

I will tell you why!

I live in Finland(Europe), but same apply for most Europe countries like Germany. There is no IRA or 401K in Europe!

Extremely confusing however this I know in Europe normal pension age is usually 65-68 years old. How does the Europe system work then?

Europe system:
A. Depending on how much you have earned doing work(i.e not landlord and not stock income) you get pension.
B. In addition the last years before pension do give PENSION BONUS which can be significant. It can be a noticeable difference if you go pension at age 65 or 68.
C. You can NOT withdraw suddenly money from pension like from some huge 401K or IRA account. You get pension/month until you die that simple.

Furthermore lets assume I go now with your 4% rule I read about it is supposed to be expenses/month(example 2000) *12(12months)*25year= 600 000 euro or dollar whatever about same.

Right, but here is the problem give me 25 years and I still ain't 68 years old which is the prime perfect pension age for Europeans to get highest possible pension!

I don't have a clue what my pension is that is another problem, but I can tell you this if I would go on pension today it would be miserable pension and they would not pay pension before my pension age which is roughly 65 or 68.

Now there is a method how Europeans can go on early pension either they are filthy rich that simple or their passive income> expenses. Passive income as in landlord for example. There is a loophole here though... I have noticed that today in my country you can get very good income if you do part time job say 20-30 hours/week and get passive income in addition.

European style is also not this American style... In Europe we are entitled to 5 weeks paid holiday so holiday time in Europe is longer then in America.

Yes I want to retire, but I need that extra money from work and I am afraid that will be my answer for the next decade unless I start selling real estate, but that would be like shooting in my own foot of income.
Situation after 10 years can look much brighter to me when I have eliminated one big mortgage... now in Europe we do not need study loans, but we have much higher tax which makes it not to hard to get wealthy, but become millionaire is difficult in Europe unless you are successful entrepreneur, but there is great risk with becoming entrepreneur.

[RetiredAt63]

I understand your frustration - I have learned more than I ever needed to know about the US pension plans  But you will also see people from Canada (lots of us here) and Australia and New Zealand, and we are not American, and our pension plans are not theirs.  For example, there are some active threads right now (including here) that have shifted over to looking at how it works here - we have company pension plans (technically RSPs, but no one ever uses that acronym) that some have, some don't.  We can save for our own pension with RRSPs (Registered Retirement Savings Plans) that are tax deferred but have limits.  We now have TFSAs (Tax Free Savings Plans that use after-tax dollars but income from them is tax free).  We also have the CPP/QPP (Canada/Quebec Pension Plan), plus OAS (Old Age Security), and for those whose income is very low, the GIS (Guaranteed Income Supplement).  All of these have age/income restrictions.  We have universal health care for most things, supplemented by private health insurance for the rest.  Confused yet?  ;-)

So obviously our parameters are different.  Our obvious health costs (premiums) are lower, so this affects retirement planning.  Our taxes are generally much higher, so that affects saving for retirement.

So the thing is, the specifics on the blog, and the specifics that are discussed by Americans here on the Forums, are not relevant to you (or me).  But the principles ARE!!!  Optimise your life.  Save, don't be a spendthrift.  Figure out how much you need to retire.  Figure in your pensions - that 4% safe annual withdrawal rate assumes you only have your savings - but Canadians and Europeans have pensions waiting for them.  Find out the details of your pension and what you can and can't do in terms of contributions and retiring.

Plus, Americans (at least a lot of them on this blog) are pushed into a rotten work/life balance.  Horrible vacation policies (not like your 5 weeks).  Terrible parental leaves (terrible maternity leaves, and paternity leaves are mostly a joke).  Tethered to their cell phones 24/7.  Canadians do this less, and I think Europeans even less.  So the job stress that makes people want out super early is not as bad for us.  I could have retired at 60, but changed jobs instead and had a wonderful final 3 years. I do not regret them for a minute.

So, take away message - take what is useful to you and ignore the rest.  Be positive!!!

Have you wondered why people from Europe do not comment this unless they are very rich(millionaire)?

I will tell you why!

I live in Finland(Europe), but same apply for most Europe countries like Germany. There is no IRA or 401K in Europe!

Extremely confusing however this I know in Europe normal pension age is usually 65-68 years old. How does the Europe system work then?

Europe system:
A. Depending on how much you have earned doing work(i.e not landlord and not stock income) you get pension.
B. In addition the last years before pension do give PENSION BONUS which can be significant. It can be a noticeable difference if you go pension at age 65 or 68.
C. You can NOT withdraw suddenly money from pension like from some huge 401K or IRA account. You get pension/month until you die that simple.

Furthermore lets assume I go now with your 4% rule I read about it is supposed to be expenses/month(example 2000) *12(12months)*25year= 600 000 euro or dollar whatever about same.

Right, but here is the problem give me 25 years and I still ain't 68 years old which is the prime perfect pension age for Europeans to get highest possible pension!

I don't have a clue what my pension is that is another problem, but I can tell you this if I would go on pension today it would be miserable pension and they would not pay pension before my pension age which is roughly 65 or 68.

Now there is a method how Europeans can go on early pension either they are filthy rich that simple or their passive income> expenses. Passive income as in landlord for example. There is a loophole here though... I have noticed that today in my country you can get very good income if you do part time job say 20-30 hours/week and get passive income in addition.

European style is also not this American style... In Europe we are entitled to 5 weeks paid holiday so holiday time in Europe is longer then in America.

Yes I want to retire, but I need that extra money from work and I am afraid that will be my answer for the next decade unless I start selling real estate, but that would be like shooting in my own foot of income.
Situation after 10 years can look much brighter to me when I have eliminated one big mortgage... now in Europe we do not need study loans, but we have much higher tax which makes it not to hard to get wealthy, but become millionaire is difficult in Europe unless you are successful entrepreneur, but there is great risk with becoming entrepreneur.

[Goldielocks]

Hey sir Doug, you are right, this is a very spendy plan. DH is not really on board and I am doing well to avoid expensive suv's.

His choice to not work for the last 11 or so years, so I don't really feel bad when he says he wants to work to 60 plus.

Two items reduce risk in other phases, we would not transfer to the next unless satisfied with cash at the start. Each phase has less income than previous.

With regards to interest rates, I would agree except that we will be sitting on an $800 k home and can easily cut the spend in half.

In general my plan is designed to make my DH happy and comfortable with the idea of my transitioning to consulting part time and building a side income.

[Landlord2015]

So, take away message - take what is useful to you and ignore the rest.  Be positive!!!

True and I feel still feel to young for early FIRE...  There  exist sports,  antioxidiants  and Carnosine:
https://en.wikipedia.org/wiki/Carnosine
that help me stay young. Nothing stops ageing completely but it can slow down a bit.

Hey sir Doug, you are right, this is a very spendy plan. DH is not really on board and I am doing well to avoid expensive suv's.

His choice to not work for the last 11 or so years, so I don't really feel bad when he says he wants to work to 60 plus.

Two items reduce risk in other phases, we would not transfer to the next unless satisfied with cash at the start. Each phase has less income than previous.

With regards to interest rates, I would agree except that we will be sitting on an $800 k home and can easily cut the spend in half.

In general my plan is designed to make my DH happy and comfortable with the idea of my transitioning to consulting part time and building a side income.

I get that DH is your husband but who on this forum is Doug? Doug nickname sounds slightly like Disney Donald Duck:). I did not mean to insult anyone on the forum my apologies if anyone feel insulted. However you did lost me with your reference to Doug it sounds confusing who do you mean?

[daverobev]

Have you wondered why people from Europe do not comment this unless they are very rich(millionaire)?

Pet peeve: Europe is not a country. Different countries have entirely different systems. You can compare France, Germany, Finland and the UK only as much as the US and Canada.

In the UK, there is a now £15k a year tax shield available, in addition to reasonable pension schemes.

I would be happily FIREd in the UK on less than £200k, I think.

Scandinavian countries I can't comment on. From what I understand it is very possible to retire early in France, and Spain - in low cost of living areas, of which there are plenty.

[Goldielocks]

So, take away message - take what is useful to you and ignore the rest.  Be positive!!!

True and I feel still feel to young for early FIRE...  There  exist sports,  antioxidiants  and Carnosine:
https://en.wikipedia.org/wiki/Carnosine
that help me stay young. Nothing stops ageing completely but it can slow down a bit.

Hey sir Doug, you are right, ...

I get that DH is your husband but who on this forum is Doug? Doug nickname sounds slightly like Disney Donald Duck:). I did not mean to insult anyone on the forum my apologies if anyone feel insulted. However you did lost me with your reference to Doug it sounds confusing who do you mean?

Auto correct feature on my phone.  Sirdoug007 posted a few questions.

[smilla]

As Sirdoug pointed out, the big flaw in this method is the assumption of smooth returns, especially during the first decade or so.  It probably would be better to stick with cFiresim, which is capable of accounting for different spending levels over time ...

Before beginning drawdown of a particular pot, you'd want to make AA more conservative but of course there is still risk. Like goldielocks & T Biologist, I plan to spend significantly more in the first 10 or so years and then ramp down over 10 years to my actual needs/comfort-based expenses so I'd have a significant amount of room to maneuvre if the markets weren't going my way in the first few phases.

I will definitely test my plans on cFiresim though, thank you. Luckily I have almost 10 years to get them right :)

Using the 4% rule, I need $600,000.
...
So I can actually retire with only $573,600 today

Doesn't seem like it really saved you much.  Maybe a few months of working?  For the added sequence of returns risk.

Yeah, not the best example, but I wanted to keep the annual withdrawal the same for the comparison. It looks better when you want to start with higher spending and reduce over 2 or 3 phases.

If you have much reduced expenses later, or another income stream kicking in (like a pension), and you weren't counting either or both of those, yes, this way will speed it up, but I'd argue that's just an artifact of you using the 4% rule blindly without actually calculating what you need.
...
Looking at your "buckets" is a good ER strategy, and quite common (you can find blog posts and books on it, even), but it isn't actually gaining you anything, other than perhaps a clearer look at something you may have missed without that different look.

Ha you got me - but in my defense, 25 times expenses is loudly proclaimed around here without much (any?) discussion of how to "actually calculate what you need." :) (Or was I just blind to it and will now see it everywhere?) Also the 4% rule is such an amazing revelation on its own that tweaking never occurred to me until goldielocks broke down the "buckets" strategy (which I hadn't come across/was blind to before). 

A more nuanced year-by-year income/spending on something like cFIREsim would serve as well, and, I'd argue, be even better, as you can take into account sequence of returns risks, and find a number you're comfortable with.

If your spending is going to drop dramatically (as many people's do, as, say, kids graduate, etc.), plan it out with that tool much more precisely than the "pick a number I think will represent returns and inflation over that timeframe and hope I'm right."

Will do, thanks.

[Goldielocks]

There were a few great posts further up from Arpelspy and others comparing my bucket model with SWR.   

Although I agree that the math can more or less work out, somewhat similarly (other than the cash only for the first phase, spend to zero...),,,,  and I, too, really like and recommend cfireSim since it was linked for me a few months ago...

The two key differences:

1)  By spending to zero it allows me to launch retirement before I have a SWR of 4% generating the income I want.   

2)  The phasing approach has a built in phase "gateway" decision point before moving to the next level.  I can build in all sorts of backup plans, and fail safes, to use or check before moving on to the next phase.  If the market is exceptionally poor in one, then I delay transitioning to another phase with less opportunity for income, if desired.  e.g., continue some part time work, save up more, sell property, whatever is needed.

Because of this twist on the risk management, (more about me and less about the markets) I am more confident with aggressive rates of return on the money I am not committed to spending. It is not a big deal if the market returns half of what I hope for a series of years, if I can delay starting to spend it.

[MMMdude]

I voted no

Everyone needs to keep in mind that they have been in an environment the last decade whereby S&P is at record highs after a record stock market drop in 2008.  For all the overly optimistic MMMer's, let's see how they feel after a 30% market drop

[Altons Bobs]

It's the opposite that I see here, I think people here are overly optimistic about FIREing.  If you always will have a side gig to pay your expenses and always "working" but claim that you're retired, and won't touch your principal at all, then you can "FIRE" at anytime.  Planning to withdraw 4% with no side gig and expect to last forever is not very realistic.

[arebelspy]

It's the opposite that I see here, I think people here are overly optimistic about FIREing.  If you always will have a side gig to pay your expenses and always "working" but claim that you're retired, and won't touch your principal at all, then you can "FIRE" at anytime.  Planning to withdraw 4% with no side gig and expect to last forever is not very realistic.

So people can't earn extra money, and if they don't, they're unrealistic.  Heh.

I suppose one must have enough to fund their ER with 0% TIPS for 100 years or is that too reliant on our government not collapsing, and thus naïve?

[Altons Bobs]

It's the opposite that I see here, I think people here are overly optimistic about FIREing.  If you always will have a side gig to pay your expenses and always "working" but claim that you're retired, and won't touch your principal at all, then you can "FIRE" at anytime.  Planning to withdraw 4% with no side gig and expect to last forever is not very realistic.

So people can't earn extra money, and if they don't, they're unrealistic.  Heh.

I suppose one must have enough to fund their ER with 0% TIPS for 100 years or is that too reliant on our government not collapsing, and thus naïve?

That's not what I meant at all. I was saying for someone to assume that a 4% withdrawal rate is safe and not have to work or earn any extra income to supplement and expect their money to last forever is not realistic.

[arebelspy]

Gotcha.

Yes, you are one of the people the OP was talking about.  :)

[sol]

and expect their money to last forever is not realistic.

Mostly it's the living forever part that I find unrealistic. 

Having your money last as long as you do is pretty easy.  Historically, a 4% SWR has an 85% chance of lasting at least 50 years.  85% is not exactly ironclad, but I think it qualifies as "realistic".  Feel free to disagree.

[Goldielocks]

...

So people can't earn extra money, and if they don't, they're unrealistic.  Heh.
..

That's not what I meant at all. I was saying for someone to assume that a 4% withdrawal rate is safe and not have to work or earn any extra income to supplement and expect their money to last forever is not realistic.

Well,by definition of the SWR study, 4% is the rate of withdrawal to last 30, and usually 40+ years.... which is technically not forever...

[Mr. Green]

I think most folks simply don't realize how high the success rate is for a 4% SWR. I think when presented with the actual data, as Sol describes above, most would change their minds unless "safe" to them means no chance of failure. Ironically though, even continuing to have a job does not have a 100% success rate. Jobs can be lost and people can die prematurely.

[dude]

Yeah, good stuff.  Really cool way to look at it if you're looking at it from the beginning.  For me, I do this kind of roughly, though not working backwards like you have, but forward, given current stash and savings rate and expected future pension + SS income. For me it looks roughly like this:

From retirement at 54 until 62, I will get FERS pension + SRS, totaling somewhere between $65k - $75k (depends on pay raises/adjustments over the next three years which will be my "high-3").  Current expenses, not including Fed taxes, is around $65k.  So using a tax calculator, I figure I need @$79k pre-tax (I won't pay state taxes on my pension in my state).  I plan to be working at a hobby job (am already doing it PT on weekends now) and earning $5k-$10k/year.  Depending on how that works out, I'll either need to withdraw some or none from my TSP.  But even if I took the entire shortfall from my TSP (worst case), it will be somewhere between $5k - $15k.  On an expected $800K portfolio (currently at $525k, with $31k annual additions going forward), that's anywhere from a 0.6% to 1.9% draw.  So I use the worst case.

At 62, the SRS ($10k - $12k) goes away.  So withdrawals from TSP would increase to cover shortfall, in order to hold off on taking SS until FRA (or possibly 70). Conservative estimate is that after 8 years of these low withdrawals, my TSP should be anywhere from $1.02M - $1.3M. Withdrawals then at age 62 of $17k - $22k from the lower figure ($1.02M) would only be 1.6% - 2.2%).  Again, account continues to grow another 5-8 years when I hit FRA or 70, at which point, I'm getting $25k - $32.5k from SS (today's dollars; if I discount to 77% it's $19k - $25k), which significantly lowers the TSP draw -- though RMD's will kick in then.  But I should be pretty flush with cash.

If I spend less than I do now (which statistically is the case) and/or investments yield better than 6% going forward  (historically the case), the numbers look even rosier.  But I really try to be conservative in these projections.  Either way, pretty sure I don't have to work again ever after 54.  And yet there's still that nagging little scintilla of doubt in the back of my mind!

Dude, you are fuckin' set.  And you still have a scintilla of doubt?

Yeah man, I do. Life has a nasty way of throwing curveballs, and I'm one of those guys who's kinda always waiting for the other shoe to drop.  Hopefully, I'll look back on those fears 15-20 years from now and laugh, but for now, I'll continue to have that nagging little doubt -- though I'm reasonably confident, barring a major meltdown in the markets between now and my FIRE date, that I'll retire on my eligibility date.

[Thegoblinchief]

I think most folks simply don't realize how high the success rate is for a 4% SWR. I think when presented with the actual data, as Sol describes above, most would change their minds unless "safe" to them means no chance of failure. Ironically though, even continuing to have a job does not have a 100% success rate. Jobs can be lost and people can die prematurely.

Bolded part! I'd much rather take a small, judicious risk in retiring earlier than work longer for absolute certainty. Time is a finite resource.

[JLee]

My roommate works for a retirement/401k company and she told me last night I need at least $4-5mil to retire.

No.....

[Squirrel away]

In the UK, there is a now £15k a year tax shield available, in addition to reasonable pension schemes.

I would be happily FIREd in the UK on less than £200k, I think.

I would think that was cutting it a bit close. I think £300k for an individual/ £600k for a couple should be enough.

[Altons Bobs]

...

So people can't earn extra money, and if they don't, they're unrealistic.  Heh.
..

That's not what I meant at all. I was saying for someone to assume that a 4% withdrawal rate is safe and not have to work or earn any extra income to supplement and expect their money to last forever is not realistic.

Well,by definition of the SWR study, 4% is the rate of withdrawal to last 30, and usually 40+ years.... which is technically not forever...

Exactly my point. For someone to retire at 30, expect their 4% is safe forever, but if it lasts for 30 years only, they run out of money at age 60. If they die at 60, no problem, what if they live longer than the 30-year "safe" withdrawal rate?  They're out of money at 60, have to come out of retirement to find work at 60. I'd rather accumulate enough now than having to find a job at an old age.

[arebelspy]

...

So people can't earn extra money, and if they don't, they're unrealistic.  Heh.
..

That's not what I meant at all. I was saying for someone to assume that a 4% withdrawal rate is safe and not have to work or earn any extra income to supplement and expect their money to last forever is not realistic.

Well,by definition of the SWR study, 4% is the rate of withdrawal to last 30, and usually 40+ years.... which is technically not forever...

Exactly my point. For someone to retire at 30, expect their 4% is safe forever, but if it lasts for 30 years only, they run out of money at age 60. If they die at 60, no problem, what if they live longer than the 30-year "safe" withdrawal rate?  They're out of money at 60, have to come out of retirement to find work at 60. I'd rather accumulate enough now than having to find a job at an old age.

Literally no one withdraws 4%, inflates it year after year, and blindly continues to do so until they run out of money.

[JLee]

...

So people can't earn extra money, and if they don't, they're unrealistic.  Heh.
..

That's not what I meant at all. I was saying for someone to assume that a 4% withdrawal rate is safe and not have to work or earn any extra income to supplement and expect their money to last forever is not realistic.

Well,by definition of the SWR study, 4% is the rate of withdrawal to last 30, and usually 40+ years.... which is technically not forever...

Exactly my point. For someone to retire at 30, expect their 4% is safe forever, but if it lasts for 30 years only, they run out of money at age 60. If they die at 60, no problem, what if they live longer than the 30-year "safe" withdrawal rate?  They're out of money at 60, have to come out of retirement to find work at 60. I'd rather accumulate enough now than having to find a job at an old age.

I would like to think that everyone here would have the foresight to notice that something wasn't working out well before they ran out of money at 60.

[sol]

what if they live longer than the 30-year "safe" withdrawal rate?  They're out of money at 60, have to come out of retirement to find work at 60.

You're new here so I can forgive you not having read all of the MMM content.  Let's do a quick review.

1.  The straight up unmodified 4% rule has historically survived a 30 year retirement in 95% of cases.

2.  The straight up unmodified 4% rule has historically survived a 60 year retirement in more than 80% of cases.

3. For time periods greater than about 25 years, the 4% rule has a greater chance of doubling your nest egg than of depleting it.

4. Small tweaks to the 4% rule dramatically improve its chance of success.  Examples of things that help...
  4a.  Skewing your AA to small caps gets you to 4.4%
  4b.  Foregoing the inflation adjustment in down years gets you to near100% success for all time periods.
  4c.  Any future income you may get, like social security which typically replaces about half of your income, reduces the % drawn from that 4%.
  4d.  In the US, a 3.25% swr has NEVER failed, for any time period.

[JLee]

what if they live longer than the 30-year "safe" withdrawal rate?  They're out of money at 60, have to come out of retirement to find work at 60.

You're new here so I can forgive you not having read all of the MMM content.  Let's do a quick review.

1.  The straight up unmodified 4% rule has historically survived a 30 year retirement in 95% of cases.

2.  The straight up unmodified 4% rule has historically survived a 60 year retirement in more than 80% of cases.

3. For time periods greater than about 25 years, the 4% rule has a greater chance of doubling your nest egg than of depleting it.

4. Small tweaks to the 4% rule dramatically improve its chance of success.  Examples of things that help...
  4a.  Skewing your AA to small caps gets you to 4.4%
  4b.  Foregoing the inflation adjustment in down years gets you to near100% success for all time periods.
  4c.  Any future income you may get, like social security which typically replaces about half of your income, reduces the % drawn from that 4%.
  4d.  In the US, a 3.25% swr has NEVER failed, for any time period.

Not to mention hobby income, part time / entertainment-job income, etc.

[dude]

Not to mention hobby income, part time / entertainment-job income, etc.

THIS is the only pet peeve I have with the overly optimistic members of the  FIRE crowd -- the idea that hobby income/part-time income will be available to someone years removed from the workforce, or say at age 70, is far too optimistic, I think.  Would you REALLY want to be flipping burgers at age 65 because your income is running low?  That would constitute a grave FIRE failure in my eyes.  And many, if not most, people will not be capable of doing much work at age 70 (yes, of course there are exceptions).  Newsflash -- mental capacity on average peaks at age 53 -- from there it's steadily downhill.  It's why seniors are such ripe targets for fraudulent schemes.  You literally will not be able to comprehend certain things when you reach that age.  So retiring on the bare minimum with the notion that, "hey, I'll just get some part-time work if things don't pan out 20 years from now" is pie-in-the-sky optimism as far as I'm concerned.

[coppertop]

Not to mention hobby income, part time / entertainment-job income, etc.

THIS is the only pet peeve I have with the overly optimistic members of the  FIRE crowd -- the idea that hobby income/part-time income will be available to someone years removed from the workforce, or say at age 70, is far too optimistic, I think.  Would you REALLY want to be flipping burgers at age 65 because your income is running low?  That would constitute a grave FIRE failure in my eyes.  And many, if not most, people will not be capable of doing much work at age 70 (yes, of course there are exceptions).  Newsflash -- mental capacity on average peaks at age 53 -- from there it's steadily downhill.  It's why seniors are such ripe targets for fraudulent schemes.  You literally will not be able to comprehend certain things when you reach that age.  So retiring on the bare minimum with the notion that, "hey, I'll just get some part-time work if things don't pan out 20 years from now" is pie-in-the-sky optimism as far as I'm concerned.

Where do you get this idea?  I am 60 and I can assure you that my mental capacity is just good as it ever was.   We have a legal assistant here who is 70 years old and is one of the best in the firm.  Please do not generalize this way. 

[arebelspy]

Not to mention hobby income, part time / entertainment-job income, etc.

THIS is the only pet peeve I have with the overly optimistic members of the  FIRE crowd -- the idea that hobby income/part-time income will be available to someone years removed from the workforce, or say at age 70, is far too optimistic, I think.  Would you REALLY want to be flipping burgers at age 65 because your income is running low?  That would constitute a grave FIRE failure in my eyes.  And many, if not most, people will not be capable of doing much work at age 70 (yes, of course there are exceptions).  Newsflash -- mental capacity on average peaks at age 53 -- from there it's steadily downhill.  It's why seniors are such ripe targets for fraudulent schemes.  You literally will not be able to comprehend certain things when you reach that age.  So retiring on the bare minimum with the notion that, "hey, I'll just get some part-time work if things don't pan out 20 years from now" is pie-in-the-sky optimism as far as I'm concerned.

Why does it have to wait until then?  Everyone who is against the "earn more money" idea always throws out the extreme "Good luck earning money when you're 105, blind, arthritic, and can't get out of your chair!"

Why did you pick 70?  Someone who FIREs at 30, and their FIRE plan starts to fail (something you can see years, if not decades, off) is going to wait 40 years for it to totally fail before earning a little more?

Earning a little more seems like a valid idea to me, strawmen about very old people aside.

[sirdoug007]

what if they live longer than the 30-year "safe" withdrawal rate?  They're out of money at 60, have to come out of retirement to find work at 60.

You're new here so I can forgive you not having read all of the MMM content.  Let's do a quick review.

1.  The straight up unmodified 4% rule has historically survived a 30 year retirement in 95% of cases.

2.  The straight up unmodified 4% rule has historically survived a 60 year retirement in more than 80% of cases.

3. For time periods greater than about 25 years, the 4% rule has a greater chance of doubling your nest egg than of depleting it.

4. Small tweaks to the 4% rule dramatically improve its chance of success.  Examples of things that help...
  4a.  Skewing your AA to small caps gets you to 4.4%
  4b.  Foregoing the inflation adjustment in down years gets you to near100% success for all time periods.
  4c.  Any future income you may get, like social security which typically replaces about half of your income, reduces the % drawn from that 4%.
  4d.  In the US, a 3.25% swr has NEVER failed, for any time period.

Most people (even well read FIRE freaks on these boards) seem totally blind to these facts.

Part of the problem is the 4% rule is touted as the method to make your money last 30 years.  What they don't say is that is makes your money last 30 years in THE WORST RETIREMENT YEAR IN THE HISTORY OF STOCK INVESTING. 

In the vast majority of years, the 4% rule ends up more than doubling your money after 30 years!  And you can pretty much tell how bad of a year you retired in at 10-15 years out.  Plenty of time to make adjustments. 

The markets have to be REALLY bad to challenge the 4% rule.  Like <2% real annualized return over the first 15 years bad.  That is truly awful and only happens a few times a century.

https://www.kitces.com/blog/what-returns-are-safe-withdrawal-rates-really-based-upon/

[Moustachienne]

I wonder if some of the pessimism, er caution, is not so much, or not only, that people don't trust that their 4% SWR will last but that they don't trust that their expenditures will not go up unpredictably.  I think the antidote to that is to have a very good bead on your current expenditures and *feel very comfortable* with the lifestyle they afford you.  That would mean that you're happy with the costs of your current coverage for necessities, your consumer discretionary spending and your hedges against bad things, i.e. often handled by insurance or planning.  Once those things are on set and forget, you're good to go.  Accumulating more and more money doesn't replace self-knowledge.

[RetiredAt63]

What Moustachienne said.  Plus there is another thread on just this, and most people said their expenses in retirement dropped - when they went up it was on optional spending, like travel.  Surely anyone whose financial planning is moustachian knows enough to pay attention, and adjust spending/income as needed?

[flan]

I think it's fair to have some caution about the future, (e.g. we're aiming 100K higher for our FIRE stash than we would at current levels of spending due to not knowing how much new little humans will cost to raise, such as having no way of knowing whether one may be born disabled, or need to be hospitalized, etc.)

For those who already have kids or otherwise have a fairly predictable ER lifestyle, why not put trust in yourselves that if if you've made your way to FIRE, you're pretty good at 'stashing away cash? If the market crashes, the market crashes for those individuals who are still fully employed as well. If this unfortunate market crash doesn't happen until you're "beyond peak mental capacity supposedly at 53y (population mean/median, not applicable to individuals)", this means most likely your stash has had time to grow a whole bunch before then, and you're probably a-okay.

[FrugalFan]

I think if your budget allows for some play spending (travel or eating out or whatever) then you have extra things you can cut out in bad years. If your budget is really bare-bones, you have fewer options. But you could still earn extra income, downsize your house if you own your house, or move to a lower COL area. It's reassuring to think about all these back-up options. 

[Metta]

I think most folks simply don't realize how high the success rate is for a 4% SWR. I think when presented with the actual data, as Sol describes above, most would change their minds unless "safe" to them means no chance of failure. Ironically though, even continuing to have a job does not have a 100% success rate. Jobs can be lost and people can die prematurely.

Bolded part! I'd much rather take a small, judicious risk in retiring earlier than work longer for absolute certainty. Time is a finite resource.

Absolutely!

[Mr. Green]

Not to mention hobby income, part time / entertainment-job income, etc.

THIS is the only pet peeve I have with the overly optimistic members of the  FIRE crowd -- the idea that hobby income/part-time income will be available to someone years removed from the workforce, or say at age 70, is far too optimistic, I think.  Would you REALLY want to be flipping burgers at age 65 because your income is running low?  That would constitute a grave FIRE failure in my eyes.  And many, if not most, people will not be capable of doing much work at age 70 (yes, of course there are exceptions).  Newsflash -- mental capacity on average peaks at age 53 -- from there it's steadily downhill.  It's why seniors are such ripe targets for fraudulent schemes.  You literally will not be able to comprehend certain things when you reach that age.  So retiring on the bare minimum with the notion that, "hey, I'll just get some part-time work if things don't pan out 20 years from now" is pie-in-the-sky optimism as far as I'm concerned.

Unless you blindly run your portfolio into the ground, the " have to flip burgers at 65" scenario is relatively impossible for someone who had enough to retire in the first place. For one, there is Social Security and for a lot of folks that will cover a significant portion of their expenses once they start drawing it. That immediately reduces the draw on a portfolio. There's also a drastic drop in spending as folks reach later years. My grandparents are in their late 80's and I'd bet they spend virtually nothing, and they're some of the healthiest folks their age I've seen. They don't care for long trips anymore and and when they do go somewhere they want to see family. They're not buying things and their house has been paid for for decades. They're probably worth seven figures so they could certainly afford to do things but at their age they're content to do what they're doing. I'd say that has been their lifestyle for the last 10 years. So you're going to know WELL before 65 if you're in trouble based on what you're spending and how big your stash is at that time.

[ash7962]

Not to mention hobby income, part time / entertainment-job income, etc.

THIS is the only pet peeve I have with the overly optimistic members of the  FIRE crowd -- the idea that hobby income/part-time income will be available to someone years removed from the workforce, or say at age 70, is far too optimistic, I think.  Would you REALLY want to be flipping burgers at age 65 because your income is running low?  That would constitute a grave FIRE failure in my eyes.  And many, if not most, people will not be capable of doing much work at age 70 (yes, of course there are exceptions).  Newsflash -- mental capacity on average peaks at age 53 -- from there it's steadily downhill.  It's why seniors are such ripe targets for fraudulent schemes.  You literally will not be able to comprehend certain things when you reach that age.  So retiring on the bare minimum with the notion that, "hey, I'll just get some part-time work if things don't pan out 20 years from now" is pie-in-the-sky optimism as far as I'm concerned.

Others have responded, but I'm one of those people who think hobby income/part-time income will be available for me.  I hope to retire at about 30 yrs old, and I'm positive I'll be able to find part time income during my 30's.  I also think it won't be too difficult to tell if my plans are working out or not.  I'm also pretty unsure of what my actual expenses will be since I want to move to a much lower COL area, and some of my hobbies will naturally lower expenses (e.g. gardening).

Here's kinda how I think about it:

• In the first year I'll be able to tell if I can live on the 4% withdrawal rate, how hard it will be to pull back to 3% withdrawal rate if necessary, or, worst case, how much part time income I need to cover expenses above 4% withdrawal rates.  At this point I can decide to call the past year a sabbatical and go back to work, or adjust plans as necessary (get part time work, embark on low cost travel, do permaculture internship with paid room and board)
• If withdrawal rates cover expenses, but the markets are bearish enough in the first few years that my stash is at risk then I'll still be in my 30's, and I'll know if I'm good enough at my hobbies to make some money or alternatively reenter the work force (part or full time)
• If after a decade I have observed that my withdrawal rate covers my expenses PLUS the markets had decent returns then I'll feel pretty good about my continued retirement.  Any hobby income will be used to further fund hobbies, pad my travel budget, or just be used to lower my actual withdrawal rates further ensuring my stash's survival

I'm planning for #3.  Obviously I'm using my young age as a fail safe by assuming I'll be able to get another job within the first decade if it becomes necessary.  If I was 55 and thinking about FIRE then my plans would be less risky.  Also, I really don't enjoy full time work, but I think I'd be ok with long term part time work.  If I fail at FIRE I'll probably try to find a part time job that allows me to drop my withdrawal rate to between 0-2% and continue part time until my stash can support 4%, but I'll consider full time if it would take longer than a decade to reach 4% levels.  I really feel my worst case scenario is that it takes me 5 years to figure out things aren't working and my stash has decreased a bit but isn't 0, so I go back to work, create a more conservative FIRE plan, and still retire earlier than most people.

[Tyson]

I voted no

Everyone needs to keep in mind that they have been in an environment the last decade whereby S&P is at record highs after a record stock market drop in 2008.  For all the overly optimistic MMMer's, let's see how they feel after a 30% market drop

The stock market is always at record highs, that's called sustained growth.  If you don't think the stock market is going to keep growing, then you shouldn't invest in it.  If you think the market is going to flatten and only have booms and busts around a set value, then you are pretty much reduced to trying to 'time the market' by getting in on a bust and out on a boom.  And we all know the perils of that.

Anyway, my point is that the stock market ALWAYS goes up, that's what makes it a good investment tool.  Which means it will alway be setting new record highs. 

[NoraLenderbee]

I voted no

Everyone needs to keep in mind that they have been in an environment the last decade whereby S&P is at record highs after a record stock market drop in 2008.  For all the overly optimistic MMMer's, let's see how they feel after a 30% market drop

The stock market is always at record highs, that's called sustained growth.  If you don't think the stock market is going to keep growing, then you shouldn't invest in it.  If you think the market is going to flatten and only have booms and busts around a set value, then you are pretty much reduced to trying to 'time the market' by getting in on a bust and out on a boom.  And we all know the perils of that.

Anyway, my point is that the stock market ALWAYS goes up, that's what makes it a good investment tool.  Which means it will alway be setting new record highs.

This is exactly the kind of excessive optimism MMMdude was talking about. The market can go down and stay down long enough to bankrupt you or drive you out of the market. Look at 1966-1982: sixteen years of shitty returns, in an environment of skyrocketing inflation. That is a LONG time to watch your money lose value while you keep firing your optimism gun.

[JLee]

I voted no

Everyone needs to keep in mind that they have been in an environment the last decade whereby S&P is at record highs after a record stock market drop in 2008.  For all the overly optimistic MMMer's, let's see how they feel after a 30% market drop

The stock market is always at record highs, that's called sustained growth.  If you don't think the stock market is going to keep growing, then you shouldn't invest in it.  If you think the market is going to flatten and only have booms and busts around a set value, then you are pretty much reduced to trying to 'time the market' by getting in on a bust and out on a boom.  And we all know the perils of that.

Anyway, my point is that the stock market ALWAYS goes up, that's what makes it a good investment tool.  Which means it will alway be setting new record highs.

This is exactly the kind of excessive optimism MMMdude was talking about. The market can go down and stay down long enough to bankrupt you or drive you out of the market. Look at 1966-1982: sixteen years of shitty returns, in an environment of skyrocketing inflation. That is a LONG time to watch your money lose value while you keep firing your optimism gun.

What about 1983? 1984? 1985? 1986?

There's a reason people look at 30 or 40 year time periods.

[Mr. Green]

I voted no

Everyone needs to keep in mind that they have been in an environment the last decade whereby S&P is at record highs after a record stock market drop in 2008.  For all the overly optimistic MMMer's, let's see how they feel after a 30% market drop

The stock market is always at record highs, that's called sustained growth.  If you don't think the stock market is going to keep growing, then you shouldn't invest in it.  If you think the market is going to flatten and only have booms and busts around a set value, then you are pretty much reduced to trying to 'time the market' by getting in on a bust and out on a boom.  And we all know the perils of that.

Anyway, my point is that the stock market ALWAYS goes up, that's what makes it a good investment tool.  Which means it will alway be setting new record highs.

This is exactly the kind of excessive optimism MMMdude was talking about. The market can go down and stay down long enough to bankrupt you or drive you out of the market. Look at 1966-1982: sixteen years of shitty returns, in an environment of skyrocketing inflation. That is a LONG time to watch your money lose value while you keep firing your optimism gun.

Already included in the studies that validate 4% as a SWR.

[Tyson]

I voted no

Everyone needs to keep in mind that they have been in an environment the last decade whereby S&P is at record highs after a record stock market drop in 2008.  For all the overly optimistic MMMer's, let's see how they feel after a 30% market drop

The stock market is always at record highs, that's called sustained growth.  If you don't think the stock market is going to keep growing, then you shouldn't invest in it.  If you think the market is going to flatten and only have booms and busts around a set value, then you are pretty much reduced to trying to 'time the market' by getting in on a bust and out on a boom.  And we all know the perils of that.

Anyway, my point is that the stock market ALWAYS goes up, that's what makes it a good investment tool.  Which means it will alway be setting new record highs.

This is exactly the kind of excessive optimism MMMdude was talking about. The market can go down and stay down long enough to bankrupt you or drive you out of the market. Look at 1966-1982: sixteen years of shitty returns, in an environment of skyrocketing inflation. That is a LONG time to watch your money lose value while you keep firing your optimism gun.

Shockingly, the 4% rule works even during those shitty years. 

[Langer83]

I'm surprised nobody has linked to this GREAT post on Safe Withdrawal Rates by MadFIentist from last month:
http://www.madfientist.com/safe-withdrawal-rate/

In a nutshell, the 4% rule is safe in almost all cases (95%+). The main risk is sustained poor market performance for the first decade of retirement (sequence of returns risk). The Shiller P/E10 ratio is a good predictor of medium-term market returns over the next decade, so you can use the P/E 10 to help determine whether the 4% rule is risky for when you're retiring. But really, the most conservative SWR that is justified by the past century of data (which includes the Great Depression, WWII, stagflation of 70s) is 3.5%.