This is actually a reason that I want to maximize Social Security and why I'm willing to consider a SPIA.Leesbro63 wrote: ↑Thu Mar 30, 2023 3:36 pmThis is such a great point. The 1966-1996 retire survived at just below a 4% SWR, but at age 81ish, in 1981, that retiree would probably have been in some serious dispair.EnjoyIt wrote: ↑Thu Mar 30, 2023 3:25 pm
I know you realize that 100% success means that you have >$1 when you die.
But let us think about the psychology of success. How do you think you would react if you are retired, the market is down and your portfolio is dwindling. After a few years as it starts to recover another blow comes where equities drop by 50%. You look at your portfolio and you realize that without growth you wont get to SS at current spending levels. That is what happened to the year 2000 retiree who chose to spend at 4%. Turns out after the crash in 2009, equities grew pretty well and the portfolio will likely survive all 30 years. But at that moment in 2012 or 2014 the retiree I think would be scared they may run out of money. I would suspect any rational person may very well start spending significantly less during those times to help preserve their portfolio. I suspect sleepless nights worrying how to survive. To me that is kind of like a portfolio failure.
How do you feel you would react to this type of scenario?
Just to refresh your memory, I am all for early financial independence and buying one's freedom. So I'm not trying to convince you not to retire early. Just looking to see what you consider success and is cutting it so close worth it?
There is research that most people who rely upon the stock market for retirement income will reduce their spending during a market downturn. Most people who rely upon income streams that are not market dependent (such as pensions, annuities, and Social Security) spend a larger proportion of their income stream (that is, they don't feel the need to hedge or worry about it because it is backed by something else.)
I think it's too expensive to use guaranteed income streams for everything, but for fixed essential expenses, it lets me sleep at night.