Did the 4% rule just become the 5% rule? :)

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rickcrna
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Changes to 4% rule for retirees?

Post by rickcrna »

Just read a summary of an article in this month's Financial Advisor Journal by Bill Bengen, the inventor of the 4% withdrawal rule for retirees.
Apparently, he has revised upward to 4.5 to 5% safe withdrawal rate. Here is a link to the summary.

https://www.marketwatch.com/story/the-i ... eid=yhoof2

Should promote an interesting discussion.

Rick
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Re: Changes to 4% rule for retirees?

Post by willthrill81 »

I get Bengen's argument about inflation being the big but silent killer of SWRs, but sequence of returns risk has historically been even an even bigger threat, and that hasn't gone away at all.

I wouldn't recommend that a retiree planning on a 30 year retirement start withdrawing more than 4%.
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Did the 4% rule just become the 5% rule? :)

Post by frugalor »

[Merged into the existing discussion -- moderator oldcomputerguy]

I just learned about the 4% rule not long ago. And now I read this article:

https://www.marketwatch.com/story/the-i ... =home-page

Basically, the opinion is that the 4% is for the worse market conditions. 5% should be fine in current conditions.

It sure sounds encouraging for retirees :)

I'll still follow the 4% rule though...
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Re: Changes to 4% rule for retirees?

Post by Broken Man 1999 »

Well, the good news for us is we have a larger percentage of our portfolio not to spend each year!

I think I am going to buy one of those honking 80"+ TVs from Costco. I measured the space yesterday.

If DW asks, I'll tell her Bill Bengen said it was OK! :D

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Re: Did the 4% rule just become the 5% rule? :)

Post by rich126 »

Well since a number of people won't live long enough to run out of money, I'm sure it probably could even be higher but if you do live a long time you have to be more careful. And you have others worried about near zero real return on bonds dragging down the portfolio. But some optimistic folks still think they will get 7% real returns in the market.

I tend to be the glass half empty person so I try to be careful within reason. Drawing 5% may be fine especially if you can dial it down to 3% when things aren't doing well.

Bottom line, no one knows the future and simply are making guesses based on historical results.
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Re: Did the 4% rule just become the 5% rule? :)

Post by MathWizard »

I remember Bengen's article recommended WR of 4.5%

I thought that the 4% rule came from the Trinity Study.
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Re: Did the 4% rule just become the 5% rule? :)

Post by willthrill81 »

MathWizard wrote: Thu Oct 22, 2020 12:37 pm I remember Bengen's article recommended WR of 4.5%

I thought that the 4% rule came from the Trinity Study.
No, Bengen was the first to 'discover' the '4% rule'. The Trinity study came later.

Bengen subsequently adjusted it to 4.5% if the portfolio had a small cap tilt.
Last edited by willthrill81 on Sat Dec 26, 2020 2:02 pm, edited 1 time in total.
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Re: Did the 4% rule just become the 5% rule? :)

Post by MathWizard »

willthrill81 wrote: Thu Oct 22, 2020 12:38 pm
MathWizard wrote: Thu Oct 22, 2020 12:37 pm I remember Bengen's article recommended WR of 4.5%

I thought that the 4% rule came from the Trinity Study.
No, Bengen was the first to 'discover' the '4% rule'. The Trinity study cam later.

Bengen subsequently adjusted it to 4.5% if the portfolio had a small cap tilt.
Yes. I was recalling his later article. In the original article, he had 50% stocks, 50% intermed. treasuries,
and was looking for 100% success in the past, with his comment that 4.25% WR would deplete the
50/50 portfolio in 28 years.
Certainly lower equities in the AA and wanting 100% certainty without
adjustment lowers the sustainable WR.

I suspect that quality corp. bonds would be slightly better than treasuries.
Also, for lasting a long time, the odds are better with more stocks, though they won't be 100%.
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Re: Did the 4% rule just become the 5% rule? :)

Post by willthrill81 »

MathWizard wrote: Thu Oct 22, 2020 12:53 pm I suspect that quality corp. bonds would be slightly better than treasuries.
Historically, investment-grade corporate bonds have had very similar returns to a 20/80 allocation (TSM and intermediate-term Treasuries) but with greater volatility. You basically haven't gotten anything good with them that you couldn't have gotten with a mix of stocks and intermediate-term Treasuries.
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Re: Changes to 4% rule for retirees?

Post by Stinky »

rickcrna wrote: Thu Oct 22, 2020 12:16 pm Just read a summary of an article in this month's Financial Advisor Journal by Bill Bengen, the inventor of the 4% withdrawal rule for retirees.
Apparently, he has revised upward to 4.5 to 5% safe withdrawal rate. Here is a link to the summary.

https://www.marketwatch.com/story/the-i ... eid=yhoof2

Should promote an interesting discussion.

Rick
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Re: Did the 4% rule just become the 5% rule? :)

Post by finite_difference »

Pretty sure Bogleheads are not about to change from 4% to 5% considering they currently follow the 3% rule. (Or 3.5% if you’re really living on the edge.)
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Re: Did the 4% rule just become the 5% rule? :)

Post by tfb »

Comment from Karsten Jeske at Early Retirement Now:
Bengen commits a pretty common logical flaw: Assume nominal returns are fixed and then lower inflation will automatically increase your real returns (and the SWR). It often doesn't work that way in reality. More likely: High CAPE and low int. rates => low real returns, low SWR
https://twitter.com/ErnRetireNow/status ... 3723126789
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Re: Did the 4% rule just become the 5% rule? :)

Post by diy60 »

finite_difference wrote: Thu Oct 22, 2020 1:04 pm Pretty sure Bogleheads are not about to change from 4% to 5% considering they currently follow the 3% rule. (Or 3.5% if you’re really living on the edge.)
Bingo. And if someone needs the ultimate conservative withdrawal % method they can always switchover to the "withdraw dividends only" threads.
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Re: Did the 4% rule just become the 5% rule? :)

Post by alex_686 »

tfb wrote: Thu Oct 22, 2020 1:18 pm Comment from Karsten Jeske at Early Retirement Now:
Bengen commits a pretty common logical flaw: Assume nominal returns are fixed and then lower inflation will automatically increase your real returns (and the SWR). It often doesn't work that way in reality. More likely: High CAPE and low int. rates => low real returns, low SWR
https://twitter.com/ErnRetireNow/status ... 3723126789
I will fully second this. Plus, from the article...
He says it was, historically, just the “worst-case scenario.” ... Historically, he says, the average safe withdrawal rate has turned out to be about 7% and at points it has reached as high as 13%.
I mean, part of the point of Safe Withdrawal Rate is that it is safe. Maybe you don't want a 97% confidence that you will not run out of money. There are issues with this. You are assuming that you live a long time and have below average returns. The good news is that you probably won't run out of money. The bad news is that you will probably die with a large pile of unspent money that will go to ungrateful heirs. What happens if we trim that back from 97% to 85%? 75%? What if we drop the 4% rule and go with a variable rate instead. Sigh.
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Re: Did the 4% rule just become the 5% rule? :)

Post by 552BB »

Hello Bogleheads,



I believe that the Trinity Study and the Bill Bengen work have been some of the most important historical studies.

Now looking at almost a century of historical information I would feel good about using this to inform my opinion on what withdrawal rate I would like to plan on when I decide to leave work.

If I were to retire today (I'm 52 years old) I would shoot for under 4%. Maybe 3 - 3.5%. If I go into my mid 50's to early 60's, 4% seems fine to me. A later retirement and I would definitely say I would feel safe with a withdrawal rate of 4.5 - 5% or higher.

As Bengen reiterates in this article, you don't treat this like physics, it an empirical study.

It will give you a good number to start with. Where you go from there is up to you.

Thats my opinion.



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Re: Did the 4% rule just become the 5% rule? :)

Post by willthrill81 »

alex_686 wrote: Thu Oct 22, 2020 1:27 pm I mean, part of the point of Safe Withdrawal Rate is that it is safe. Maybe you don't want a 97% confidence that you will not run out of money.
100% historic success definitely feels good, but we shouldn't assume that that means 100% success in the future, nor should we assume that our specific retirement period will be as bad as the worst we've ever seen. Further, if we were constructing confidence intervals, I can pretty much guarantee you that there wouldn't be a statistically significant difference between 97% and 100% success.

Also, it's important for retirees to examine their own likely longevity. Few 65 years olds will survive to age 95. So if there's only a 10% chance of that happening and a 3% chance of your withdrawal method failing, then there's only a .3% probability (about 1 in 333) that both will happen. Further, nobody is actually following the '4% rule' rigidly; everyone is flexible in their withdrawals to some degree, so there's even more security there.
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Re: Did the 4% rule just become the 5% rule? :)

Post by MathWizard »

willthrill81 wrote: Thu Oct 22, 2020 12:56 pm
MathWizard wrote: Thu Oct 22, 2020 12:53 pm I suspect that quality corp. bonds would be slightly better than treasuries.
Historically, investment-grade corporate bonds have had very similar returns to a 20/80 allocation (TSM and intermediate-term Treasuries) but with greater volatility. You basically haven't gotten anything good with them that you couldn't have gotten with a mix of stocks and intermediate-term Treasuries.
If I understand the comment, you need to add some TSM to Treasuries to get roughly the same performance as
Investment grade corp bonds (though volatility is less with the TSM+treasuries).

So using those same ratios, instead of 50% corp bonds in a 50/50 AA, you would instead have 10% TSM and 40% Treasuries,
That would mean 50/50 stocks/corp bonds has the same perf as 60/40 stocks/Treasuries, but the latter has lower volatility.

So I assume that you would recommend the 60/40 stocks/Intermed Treasuries vs the 50/50 stocks/bonds.
Is that correct?

Thanks.
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Re: Did the 4% rule just become the 5% rule? :)

Post by Schlabba »

552BB wrote: Thu Oct 22, 2020 1:30 pm Hello Bogleheads,



I believe that the Trinity Study and the Bill Bengen work have been some of the most important historical studies.

Now looking at almost a century of historical information I would feel good about using this to inform my opinion on what withdrawal rate I would like to plan on when I decide to leave work.

If I were to retire today (I'm 52 years old) I would shoot for under 4%. Maybe 3 - 3.5%. If I go into my mid 50's to early 60's, 4% seems fine to me. A later retirement and I would definitely say I would feel safe with a withdrawal rate of 4.5 - 5% or higher.

As Bengen reiterates in this article, you don't treat this like physics, it an empirical study.

It will give you a good number to start with. Where you go from there is up to you.

Thats my opinion.



:sharebeer
You can also look at it the other way around. If you retire relatively young, lets say 40, then 10 years into retirement you can still choose to go back to the workforce if the first 10 years of your retirement ate too much into your wealth.

I'd say for such a situation 5% is fine.

https://www.mrmoneymustache.com/2012/05 ... etirement/
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Re: Did the 4% rule just become the 5% rule? :)

Post by sycamore »

There was a previous BH thread on Bengen's article in Financial Advisor Journal; might be of interest to those reading along here.
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Re: Did the 4% rule just become the 5% rule? :)

Post by mrtwstr »

Catching up on the podcasts Rick and guests have mentioned a couple times recently that 4% may be too aggressive and they were down to 3%.
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Re: Did the 4% rule just become the 5% rule? :)

Post by tibbitts »

Schlabba wrote: Thu Oct 22, 2020 2:33 pm You can also look at it the other way around. If you retire relatively young, lets say 40, then 10 years into retirement you can still choose to go back to the workforce if the first 10 years of your retirement ate too much into your wealth.
There are very few cases where you could take 10 years off starting at age 40 and resume ten years later - at least not in a position many people would consider acceptable. Being hired in your 50s is just not that easy.
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Re: Did the 4% rule just become the 5% rule? :)

Post by minimalistmarc »

I think Bengen’s got it right. 5% will probably be fine, especially if you have a pension.
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Re: Did the 4% rule just become the 5% rule? :)

Post by SquawkIdent »

What about taking a percentage based on your portfolio value each year? What would the recommendation be then?
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Re: Did the 4% rule just become the 5% rule? :)

Post by sycamore »

SquawkIdent wrote: Thu Oct 22, 2020 3:30 pm What about taking a percentage based on your portfolio value each year? What would the recommendation be then?
There's no good way to give a recommendation without knowing your portfolio, AA, and expenses. But if you're interested in a general overview see https://www.bogleheads.org/wiki/Withdra ... percentage. You'll never run out of money if you only take a percentage but don't use 99% :)

A better method is variable percentage withdrawal.
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Re: Did the 4% rule just become the 5% rule? :)

Post by Grt2bOutdoors »

As you look back on your life, twisting yourself into a pretzel over using 4 percent or 5 percent on portfolio withdrawals should not be one where you spend too much time. When markets decline, spend less, when markets appreciate spend a little more. No one short of holding a guaranteed payment should get too comfortable with the idea that whatever they choose they should be complacent with it - you will need to adjust if/when the time calls for it. Who cares what Bengen says today? Six months or five years from now we can be in a totally different environment which may require an adjustment on your part or maybe no adjustment - you can save a lot, save on expenses and adjust your risk level. That’s it.
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Re: Did the 4% rule just become the 5% rule? :)

Post by Normchad »

Zoikes! I thought we all agreed last month that 0.5% was the only safe withdrawal rate now. :)

Nobody knows nothing, including these guys and me. All we know for sure is history, and it is probably the best predictor of the future that we have.....
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The inventor of the ‘4% rule’ just changed it

Post by FBN2014 »

[Thread merged into here, see below. --admin LadyGeek]

Bill Bengen says a safe withdrawal rate is now 5%.

https://www.marketwatch.com/story/the-i ... 1603380557
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Re: The inventor of the ‘4% rule’ just changed it

Post by DesertDiva »

There's already another post on this topic
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Re: Did the 4% rule just become the 5% rule? :)

Post by mptfan »

I always bristle when I hear someone refer to the "4% rule" because I don't interpret it as a rule, I interpret it as a worst case scenario for conservative planning purposes, as explained in the article cited at the beginnig of this thread...

He says it was, historically, just the “worst-case scenario.” That was based on someone who retired at the worst moment he could find in modern times: October 1968, just as the stock market peaked, and runaway inflation was beginning. Someone who retired at that moment had to endure a bear market for U.S. stocks that would last 14 years, and skyrocketing inflation that crushed the purchasing power of their savings and fed their bonds into the shredder.

Someone retiring then would still have been OK for 30 years if they withdrew no more than 4% (actually, in 2006 he raised that calculation to 4.5%), Bengen says.
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Re: Did the 4% rule just become the 5% rule? :)

Post by Da5id »

mptfan wrote: Thu Oct 22, 2020 4:10 pm I always bristle when I hear someone refer to the "4% rule" because I don't interpret it as a rule, I interpret it as a worst case scenario for conservative planning purposes, as explained in the article cited at the beginnig of this thread...
While I think 4% is fine if one is flexible if things go badly in the early years, I'm not as fond of the idea that the past encompases the worst case prospectively is a sound notion. Again, not arguing against 4%, just against confidence that there is enough history to feel so certain. I'm also less happy with applying it to periods of rather more than 30 years, which happens in some discussions.
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Re: Did the 4% rule just become the 5% rule? :)

Post by Bob.Beeman »

The oldest articles I remember seeing on a "4% rule" were by longtime Boglehead William Bernstein. He was a contributor to this site and its predecessor: Morningstar's "Vanguard Diehards" discussion board for many years.

His EfficientFrontier.com site had a feature called, appropriately enough, Efficient Frontier, published roughly quarterly, and detailing his thoughts on investing and economics.

He published the "Retirement Calculator From Hell" series partly as a sobering reply to Peter Lynch's statement that you could draw 7% per year in retirement with little chance of impoverishment during your lifespan.

The first in the series pointed out the terrible risk of "eating a diet of Alpo" in your last few years with any withdrawal rate much over 4%.

The whole series is available as:
September 1998 -The Retirement Calculator From Hell
Winter 2001 - Retirement Calculator From Hell - Part II
Fall 2001 - The Retirement Calculator From Hell - Part III
Winter 2003 - Retirement Calculator from Hell, Part IV
Spring 2003 - The Retirement Calculator from Hell, Part V

I believe his first book "The Intelligent Asset Allocator" is still in print.

Serious food for thought, [bspecially Part III - if you really believe anything has greater than an 80% survival rate for a 30-year time horizon.

- Bob Beeman.
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Re: Changes to 4% rule for retirees?

Post by TravelGeek »

rickcrna wrote: Thu Oct 22, 2020 12:16 pm Just read a summary of an article in this month's Financial Advisor Journal by Bill Bengen, the inventor of the 4% withdrawal rule for retirees.
Apparently, he has revised upward to 4.5 to 5% safe withdrawal rate.
Oh, oh, guess I’ll start updating my resume :twisted:
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Re: Did the 4% rule just become the 5% rule? :)

Post by flyingaway »

Finally, we do not have to debate between 3% and 4%.
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Re: Did the 4% rule just become the 5% rule? :)

Post by willthrill81 »

MathWizard wrote: Thu Oct 22, 2020 2:15 pm
willthrill81 wrote: Thu Oct 22, 2020 12:56 pm
MathWizard wrote: Thu Oct 22, 2020 12:53 pm I suspect that quality corp. bonds would be slightly better than treasuries.
Historically, investment-grade corporate bonds have had very similar returns to a 20/80 allocation (TSM and intermediate-term Treasuries) but with greater volatility. You basically haven't gotten anything good with them that you couldn't have gotten with a mix of stocks and intermediate-term Treasuries.
If I understand the comment, you need to add some TSM to Treasuries to get roughly the same performance as
Investment grade corp bonds (though volatility is less with the TSM+treasuries).

So using those same ratios, instead of 50% corp bonds in a 50/50 AA, you would instead have 10% TSM and 40% Treasuries,
That would mean 50/50 stocks/corp bonds has the same perf as 60/40 stocks/Treasuries, but the latter has lower volatility.
Had lower volatility. Yes.
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Re: Changes to 4% rule for retirees?

Post by White Coat Investor »

rickcrna wrote: Thu Oct 22, 2020 12:16 pm Just read a summary of an article in this month's Financial Advisor Journal by Bill Bengen, the inventor of the 4% withdrawal rule for retirees.
Apparently, he has revised upward to 4.5 to 5% safe withdrawal rate. Here is a link to the summary.

https://www.marketwatch.com/story/the-i ... eid=yhoof2

Should promote an interesting discussion.

Rick
It's not a rule. And 5% is fine...most of the time. But there is plenty of warning if this isn't one of those times.
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Re: Did the 4% rule just become the 5% rule? :)

Post by FIREchief »

Strange. With negative real yields across the curve on treasuries these days, I would expect it to drop below 4%. Add in high valuations, and we're down even further.

I read this stuff mainly as a hobby, because I use an LMP/RP allocation strategy.
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Re: Did the 4% rule just become the 5% rule? :)

Post by MikeG62 »

tfb wrote: Thu Oct 22, 2020 1:18 pm Comment from Karsten Jeske at Early Retirement Now:
Bengen commits a pretty common logical flaw: Assume nominal returns are fixed and then lower inflation will automatically increase your real returns (and the SWR). It often doesn't work that way in reality. More likely: High CAPE and low int. rates => low real returns, low SWR
https://twitter.com/ErnRetireNow/status ... 3723126789
I see it the same way. I would not be moving my WD rate up in this environment.
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Re: Did the 4% rule just become the 5% rule? :)

Post by flyingaway »

Schlabba wrote: Thu Oct 22, 2020 2:33 pm
552BB wrote: Thu Oct 22, 2020 1:30 pm Hello Bogleheads,



I believe that the Trinity Study and the Bill Bengen work have been some of the most important historical studies.

Now looking at almost a century of historical information I would feel good about using this to inform my opinion on what withdrawal rate I would like to plan on when I decide to leave work.

If I were to retire today (I'm 52 years old) I would shoot for under 4%. Maybe 3 - 3.5%. If I go into my mid 50's to early 60's, 4% seems fine to me. A later retirement and I would definitely say I would feel safe with a withdrawal rate of 4.5 - 5% or higher.

As Bengen reiterates in this article, you don't treat this like physics, it an empirical study.

It will give you a good number to start with. Where you go from there is up to you.

Thats my opinion.



:sharebeer
You can also look at it the other way around. If you retire relatively young, lets say 40, then 10 years into retirement you can still choose to go back to the workforce if the first 10 years of your retirement ate too much into your wealth.

I'd say for such a situation 5% is fine.

https://www.mrmoneymustache.com/2012/05 ... etirement/
If going back to work is an option, why do we need to discuss the Safe withdrawal rate.
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Re: Did the 4% rule just become the 5% rule? :)

Post by LadyGeek »

I merged FBN2014's thread into the on-going discussion.
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Re: Did the 4% rule just become the 5% rule? :)

Post by willthrill81 »

FIREchief wrote: Thu Oct 22, 2020 6:20 pm Strange. With negative real yields across the curve on treasuries these days, I would expect it to drop below 4%. Add in high valuations, and we're down even further.
Bond yields have been negative before. Intermediate-term Treasuries lost an average of -1.6% annually from 1941-1981. High-ish valuations on stocks are a bit concerning, but low interest rates are partly responsible for that. Also, the Fed is much more active now than in prior years.
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Re: Did the 4% rule just become the 5% rule? :)

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.....
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Re: Did the 4% rule just become the 5% rule? :)

Post by phxjcc »

mptfan wrote: Thu Oct 22, 2020 4:10 pm I always bristle when I hear someone refer to the "4% rule" because I don't interpret it as a rule, I interpret it as a worst case scenario for conservative planning purposes, as explained in the article cited at the beginnig of this thread...

He says it was, historically, just the “worst-case scenario.” That was based on someone who retired at the worst moment he could find in modern times: October 1968, just as the stock market peaked, and runaway inflation was beginning. Someone who retired at that moment had to endure a bear market for U.S. stocks that would last 14 years, and skyrocketing inflation that crushed the purchasing power of their savings and fed their bonds into the shredder.

Someone retiring then would still have been OK for 30 years if they withdrew no more than 4% (actually, in 2006 he raised that calculation to 4.5%), Bengen says.
Reposting yours.

Hoping that someone will actually read it.

14 year bear market.
Double digit inflation.

And 4% still works?

And this is long before the “financialization” of the US economy.
rossington
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Re: Changes to 4% rule for retirees?

Post by rossington »

White Coat Investor wrote: Thu Oct 22, 2020 6:02 pm
rickcrna wrote: Thu Oct 22, 2020 12:16 pm Just read a summary of an article in this month's Financial Advisor Journal by Bill Bengen, the inventor of the 4% withdrawal rule for retirees.
Apparently, he has revised upward to 4.5 to 5% safe withdrawal rate. Here is a link to the summary.

https://www.marketwatch.com/story/the-i ... eid=yhoof2

Should promote an interesting discussion.

Rick
It's not a rule. And 5% is fine...most of the time. But there is plenty of warning if this isn't one of those times.
Agreed, be flexible as to how to withdraw... but I would add this caveat: Suppose at at @ age 89 you or your spouse or both require (suddenly?) assisted living with care or skilled nursing care costing 80k,100k or more per year for 3+ years? Will you have the funds to cover this...or will you burden your children with this responsibility? This should be factored in.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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Re: Did the 4% rule just become the 5% rule? :)

Post by Outer Marker »

Mathmatically, you can withdraw 5% of the portfolio forever and never run out of money. Its the self-guarantee of a minimum, lnfatoin-adjusted "floor" that causes the potential for problems. If you're willing to live on less in the down years, you can withdraw at a higher rate on average.
snowox
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Re: Did the 4% rule just become the 5% rule? :)

Post by snowox »

So anywhere between 3-5% :beer
columbia
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Re: Did the 4% rule just become the 5% rule? :)

Post by columbia »

Outer Marker wrote: Fri Oct 23, 2020 4:49 am Mathmatically, you can withdraw 5% of the portfolio forever and never run out of money. Its the self-guarantee of a minimum, lnfatoin-adjusted "floor" that causes the potential for problems. If you're willing to live on less in the down years, you can withdraw at a higher rate on average.
And, unhelpfully, online calculators appear to be very focused on specifying how much - dollar wise - one plans to withdraw each year.
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SquawkIdent
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Re: Did the 4% rule just become the 5% rule? :)

Post by SquawkIdent »

Outer Marker wrote: Fri Oct 23, 2020 4:49 am Mathmatically, you can withdraw 5% of the portfolio forever and never run out of money. Its the self-guarantee of a minimum, lnfatoin-adjusted "floor" that causes the potential for problems. If you're willing to live on less in the down years, you can withdraw at a higher rate on average.
+1

In lean years I don't see how a person can just keep taking the 4% or 5% inflation adjusted withdrawal. It would make me feel very uncomfortable and wonder what the future holds for the portfolio. I do not care what the Trinity study says. It goes against conventional wisdom.

If I lose my job and my income drastically drops, do I still take that vacation to Jamaica as planned? I don't think so. I buckle down and cut spending. I'm not sure how that is any different than your portfolio taking a hit. The future is unknown and you have to prepare for black swans.

I for one, would not feel like going back to work at age 80, if I didn't want to.
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Re: Did the 4% rule just become the 5% rule? :)

Post by Leesbro63 »

minimalistmarc wrote: Thu Oct 22, 2020 3:27 pm I think Bengen’s got it right. 5% will probably be fine, especially if you have a pension.
5% works or it doesn’t. Other sources of income have nothing to do with it.
Seoulseeker
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Re: Did the 4% rule just become the 5% rule? :)

Post by Seoulseeker »

Reading Bengin's comments on this, it seems like it's really still a 4% rule: essentially he says that inflation is the biggest risk, and that with current inflation 5% is the new number. But given that inflation is a variable, not fixed, I read this to mean that you have to be prepared to be at 4% if inflation rises, so if you have $1MM and have minimum living expense of $50K, you may find yourself in trouble if inflation rises. In short assuming I accepted this advice, I would target no more than $40K for fixed expense and the difference for fun/vacation/gifting money.
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Re: Did the 4% rule just become the 5% rule? :)

Post by minimalistmarc »

Leesbro63 wrote: Fri Oct 23, 2020 5:14 am
minimalistmarc wrote: Thu Oct 22, 2020 3:27 pm I think Bengen’s got it right. 5% will probably be fine, especially if you have a pension.
5% works or it doesn’t. Other sources of income have nothing to do with it.
Yes, but the pension provides a safety net so if you make it to 80 and run out of money you can switch to live like a monk mode
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