### Author Topic: Age divided by 20 withdrawal rate  (Read 1203 times)

#### BTDretire

• Magnum Stache
• Posts: 2887
##### Age divided by 20 withdrawal rate
« on: February 21, 2020, 04:28:45 PM »

https://www.usatoday.com/story/money/columnist/powell/2016/08/11/new-retiree-withdrawal-rate-formula-4-percent/86877234/

I don't see it working well for the really early retirees, (not enough to live on)
Although if you have a 50+ year retirement, starting at 2% may be required.
Also there's no study of how well it works.
MMMers may want to alter it to age/15 = withdrawal rate.
But without a statistical study we don't know what survives.

#### Telecaster

• Handlebar Stache
• Posts: 2195
• Location: Seattle, WA
##### Re: Age divided by 20 withdrawal rate
« Reply #1 on: February 21, 2020, 04:57:29 PM »
Articles like these make me want to gouge my eyes out with a fork.   There is no problem that needs to be solved here.  There are two possible scenarios 1) the future is worse than the past and the 4% SWR fails, or 2) The future isn't worse than the past and the 4% SWR succeeds.    If you believe, as this guy seems to, that scenario 1) is more likely, then just use a number less than 4%.  Problem solved.

#### nereo

• Senior Mustachian
• Posts: 11857
• Location: Just south of Canada
##### Re: Age divided by 20 withdrawal rate
« Reply #2 on: February 21, 2020, 05:21:50 PM »
Articles like these make me want to gouge my eyes out with a fork.   There is no problem that needs to be solved here.  There are two possible scenarios 1) the future is worse than the past and the 4% SWR fails, or 2) The future isn't worse than the past and the 4% SWR succeeds.    If you believe, as this guy seems to, that scenario 1) is more likely, then just use a number less than 4%.  Problem solved.

My sentiments exactly.  This incredibly stupid guideline is absurd for younger investors (does anyone here seriously think Pete should have used a 1.6% WR??!).
It’s equally stupid at the older end of the spectrum (a 90 year old can only do 4.5%?  Even though there’s never been a failure in 19 years with a 4.5% — meaning that person would need to live past 109 to have even a chance of a failure??)

#### RetiredAt63

• Senior Mustachian
• Posts: 12161
##### Re: Age divided by 20 withdrawal rate
« Reply #3 on: February 21, 2020, 09:49:38 PM »
Articles like these make me want to gouge my eyes out with a fork.   There is no problem that needs to be solved here.  There are two possible scenarios 1) the future is worse than the past and the 4% SWR fails, or 2) The future isn't worse than the past and the 4% SWR succeeds.    If you believe, as this guy seems to, that scenario 1) is more likely, then just use a number less than 4%.  Problem solved.

My sentiments exactly.  This incredibly stupid guideline is absurd for younger investors (does anyone here seriously think Pete should have used a 1.6% WR??!).
It’s equally stupid at the older end of the spectrum (a 90 year old can only do 4.5%?  Even though there’s never been a failure in 19 years with a 4.5% — meaning that person would need to live past 109 to have even a chance of a failure??)

At 90 I want to be living the good life in a really nice retirement home.  I definitely plan to be digging capital as necessary.  ;-)

#### Tardis81

• Posts: 8
##### Re: Age divided by 20 withdrawal rate
« Reply #4 on: February 22, 2020, 01:22:16 AM »
Australia's Super withdrawal rate by age, for reference:

Under 65  - 4%
65–74  - 5%
75–79 - 6%
80–84 - 7%
85–89 - 9%
90–94 - 11%
95 or more - 14%

(this is designed for tax purposes however, not as "safe withdrawal guide")
Also, withdrawing 14% doesn't mean you absolutely have to spend it all).
But not too unreasonable anyway...

#### BTDretire

• Magnum Stache
• Posts: 2887
##### Re: Age divided by 20 withdrawal rate
« Reply #5 on: February 22, 2020, 06:33:29 AM »
Please, I don't want anyone to gouge their eyes out with a fork!