Please keep in mind what I said: restarting the '4% rule' is no more dangerous than starting with the '4% rule'. If the '4% rule' worked for 30 years for 1966 retirees, and the Simba backtesting spreadsheet indicates that it actually did, though barely, then it means that prior year retirees restarting their withdrawals at no more than 4% of their current portfolio balance were in no worse shape.Marseille07 wrote: ↑Fri Jan 28, 2022 10:54 amThis is not true. Suppose 1966 was a year that the 4% rule failed. The problem with ratcheting up is that it would cause earlier years (1963~1965) to fail, when the 4% rule itself would have worked for the 1963~1965 retirees.willthrill81 wrote: ↑Fri Jan 28, 2022 10:19 amYes, ratcheting up as the OP has described it, which is just 'restarting' the '4% rule', is no less safe than the '4% rule' itself. It's actually safer because the retiree presumably has fewer than 30 years of retirement remaining. But if the '4% rule' is in danger, so is ratcheting up.
Let's look at some real numbers from the Simba backtesting spreadsheet to illustrate this.
Let's say that a 1963 retiree had $1m in a portfolio with 60% TSM and 40% TBM. At the end of that year, the portfolio was up to $1,133,680, and with that year's 1.32% inflation, the amount withdrawn was $40,528, leaving $1,093,152 in the portfolio.
At the end of 1964, the portfolio's balance was $1,217,618, and with that year's 1.31% inflation, the amount withdrawn was $41,059, leaving $1,176,559 in the portfolio.
At the end of 1965, the portfolio's balance was $1,280,732.
After their inflation-adjusted withdrawals in 1963 and 1964, 1963 retirees had seen 28% nominal growth in their portfolio through the end of 1965. At the end of 1965, they could now restart the '4% rule' and withdraw $51,229, 4% of their current portfolio balance. Them withdrawing 4% of their current portfolio balance is no different at all from those who just retired in 1966 with $1,280,732 and started by withdrawing 4% of their portfolio balance, the same $51,229.