The Day the 4% Rule Died

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marcopolo
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Re: The Day the 4% Rule Died

Post by marcopolo »

Glenn wrote: Thu Jun 16, 2022 8:06 pm I think such hypothetical discussions of the "4% rule" are worthless. That guideline is useful to try to figure out if you likely have enough to retire on, but does anyone actually follow it mindlessly? I used it as a guideline when I retired 13 years ago, but never expected to simply withdraw an inflation-adjusted 4% automatically, year-after-year, even as my portfolio tanked. Has anyone?

In retirement, do what you presumably did pre-retirement: stay flexible. Thinking you're going to simply take 4%, inflation-adjusted, in the face of ever-changing financial conditions, is just foolish.
I agree, no one follows it closely, nor would that be a very realistic spending scenario. It is useful as a rough guardrail. That is how we look at it.
I actually compute several different ways of bounding spending, amortization, fixed-dollar, constant dollar, etc. and use them as a very rough guide to give us a feel for a cap on what we can spend. Even that is not a hard cap, as spending can be quite lumpy. So far, we have never come close to our rough guardrails. If the market keeps dropping like this, we may bump up against them someday.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

marcopolo wrote: Thu Jun 16, 2022 8:16 pm I agree, no one follows it closely, nor would that be a very realistic spending scenario. It is useful as a rough guardrail. That is how we look at it.
I actually compute several different ways of bounding spending, amortization, fixed-dollar, constant dollar, etc. and use them as a very rough guide to give us a feel for a cap on what we can spend. Even that is not a hard cap, as spending can be quite lumpy. So far, we have never come close to our rough guardrails. If the market keeps dropping like this, we may bump up against them someday.
:oops: Then why do you keep talking about the time value of money? You realize the time value of money, as far as comparing withdrawal methods, only comes into play when you withdraw in full every frequency right?

If you aren't hitting the guardrails then you are losing the time value of money - something you criticized.

Tbh I don't think our stances are that different, though I don't get why you're taking on the other side when you're actually on my side of not hitting the guardrails. When I say my WR is 3% but my *effective* WR is 2~2.5%, this is because I don't hit the guardrails.
marcopolo
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Re: The Day the 4% Rule Died

Post by marcopolo »

Marseille07 wrote: Thu Jun 16, 2022 8:23 pm
marcopolo wrote: Thu Jun 16, 2022 8:16 pm I agree, no one follows it closely, nor would that be a very realistic spending scenario. It is useful as a rough guardrail. That is how we look at it.
I actually compute several different ways of bounding spending, amortization, fixed-dollar, constant dollar, etc. and use them as a very rough guide to give us a feel for a cap on what we can spend. Even that is not a hard cap, as spending can be quite lumpy. So far, we have never come close to our rough guardrails. If the market keeps dropping like this, we may bump up against them someday.
:oops: Then why do you keep talking about the time value of money? You realize the time value of money, as far as comparing withdrawal methods, only comes into play when you withdraw in full every frequency right?

If you aren't hitting the guardrails then you are losing the time value of money - something you criticized.

Tbh I don't think our stances are that different, though I don't get why you're taking on the other side when you're actually on my side of not hitting the guardrails.
The big difference is the planned cutbacks based on portfolio performance.
I think we had this discussion before.
You seem very rigid in your approach, down to monthly spending limits, if i recall that exchange correctly.
We take a much more relaxed attitude. We are perfectly fine blowing through the spending goals in any given month, or any given year. We view it more as a longer term running average.
Perhaps i misunderstood your approach.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

marcopolo wrote: Thu Jun 16, 2022 8:28 pm The big difference is the planned cutbacks based on portfolio performance.
I think we had this discussion before.
You seem very rigid in your approach, down to monthly spending limits, if i recall that exchange correctly.
We take a much more relaxed attitude. We are perfectly fine blowing through the spending goals in any given month, or any given year. We view it more as a longer term running average.
Perhaps i misunderstood your approach.
I'm perfectly fine blowing through the spending goals in any given month too, it's just that I'd go into austerity mode for several months while my AA is restored.

Not sure how else you do after buying a 40K car all cash, for example.
marcopolo
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Re: The Day the 4% Rule Died

Post by marcopolo »

Marseille07 wrote: Thu Jun 16, 2022 8:38 pm
marcopolo wrote: Thu Jun 16, 2022 8:28 pm The big difference is the planned cutbacks based on portfolio performance.
I think we had this discussion before.
You seem very rigid in your approach, down to monthly spending limits, if i recall that exchange correctly.
We take a much more relaxed attitude. We are perfectly fine blowing through the spending goals in any given month, or any given year. We view it more as a longer term running average.
Perhaps i misunderstood your approach.
I'm perfectly fine blowing through the spending goals in any given month too, it's just that I'd go into austerity mode for several months while my AA is restored.

Not sure how else you do after buying a 40K car all cash, for example.
I buy the car and go on with my life spending as usual.
Lumpy, somewhat predictable, spending like this does not derail, or even significantly impact our lifestyle.

Are you suggesting that if, for example, your annual spending target was 100k, and you bought a 40k car pne year, you would slash your other spending to 60k for the year. I think that is what you said last time we had this discussion. For us, that is an unnecessarily drastic cut.

But, as I said before, everyone should do whatever approach they are comfortable with, we all have different goals and priorities.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

marcopolo wrote: Thu Jun 16, 2022 8:49 pm I buy the car and go on with my life spending as usual.
Lumpy, somewhat predictable, spending like this does not derail, or even significantly impact our lifestyle.

Are you suggesting that if, for example, your annual spending target was 100k, and you bought a 40k car pne year, you would slash your other spending to 60k for the year. I think that is what you said last time we had this discussion. For us, that is an unnecessarily drastic cut.

But, as I said before, everyone should do whatever approach they are comfortable with, we all have different goals and priorities.
I'd be slashing the discretionary portion in that case. That's what I meant by austerity - the basic needs are still met, but vacation trips can wait.
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Re: The Day the 4% Rule Died

Post by HomerJ »

Glenn wrote: Thu Jun 16, 2022 8:06 pm I think such hypothetical discussions of the "4% rule" are worthless. That guideline is useful to try to figure out if you likely have enough to retire on, but does anyone actually follow it mindlessly? I used it as a guideline when I retired 13 years ago, but never expected to simply withdraw an inflation-adjusted 4% automatically, year-after-year, even as my portfolio tanked. Has anyone?
No, I doubt any one has.

It's a rough planning tool so you know when you can think about retiring.

It's not a rock-solid plan FOR 30 years of retirement.
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Re: The Day the 4% Rule Died

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Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

marcopolo wrote: Thu Jun 16, 2022 8:49 pm Lumpy, somewhat predictable, spending like this does not derail, or even significantly impact our lifestyle.
I actually brought up the 40K car example as a surprise expense, but if it were planned, I have another idea: I temporarily raise my fixed income target.

For example, if my portfolio were 2M running 90/10 (1.8M/200K), I raise my fixed income target to be 220K~240K. This way, my monthly finance update says I'm running low on fixed income, therefore I need to slash equities to replenish it. Austerity measures still kick in, but they happen *before* the car purchase, not after.
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Re: The Day the 4% Rule Died

Post by firebirdparts »

Glenn wrote: Thu Jun 16, 2022 8:06 pm I think such hypothetical discussions of the "4% rule" are worthless. That guideline is useful to try to figure out if you likely have enough to retire on, but does anyone actually follow it mindlessly? I used it as a guideline when I retired 13 years ago, but never expected to simply withdraw an inflation-adjusted 4% automatically, year-after-year, even as my portfolio tanked. Has anyone?

In retirement, do what you presumably did pre-retirement: stay flexible. Thinking you're going to simply take 4%, inflation-adjusted, in the face of ever-changing financial conditions, is just foolish.
There's a balance, I guess. I think the real problem is overthinking rather than underthinking. If we have to discuss it, primarily you'll have to discuss trying to "disprove" it using imaginary data. Otherwise there's just nothing to talk about. It should be really clear that it is what it is [Edit: I realized after I typed this that it's not clear- lots of people can't understand that the goal is to locate the worst case, and the worst case fundamentally is a single case]. Nobody has said "oh look here, out of sample in the USA, it doesn't work". The problem with making conversation about it is that it does work.

My original post was obviously unclear but I was trying to include "arguments" that it's too low as well as too high. But I don't think they made any sense to anybody other than me.

To me, mindlessness hasn't been the problem. The problem is more like people want to argue imaginary info or esoteric questions like 'what if' the portfolio goes up after I retire.

It's supposed to be a useful answer, using suitable simplifying questions, to a universal question.
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nigel_ht
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Re: The Day the 4% Rule Died

Post by nigel_ht »

Glenn wrote: Thu Jun 16, 2022 8:06 pm I think such hypothetical discussions of the "4% rule" are worthless. That guideline is useful to try to figure out if you likely have enough to retire on, but does anyone actually follow it mindlessly? I used it as a guideline when I retired 13 years ago, but never expected to simply withdraw an inflation-adjusted 4% automatically, year-after-year, even as my portfolio tanked. Has anyone?

In retirement, do what you presumably did pre-retirement: stay flexible. Thinking you're going to simply take 4%, inflation-adjusted, in the face of ever-changing financial conditions, is just foolish.
Some folks need all of that 4% to meet expenses…so success or failure of the 4% rule is relevant to them.

Knowing when and how something fails is a good thing. It’s still a good planning rule of thumb and there are many safety factors built in for folks that use them:

1) many folks pad their expenses with discretionary. That gives then a little flexibility if things are really bad.
2) even with the discretionary added in many BHer don’t need to spend the full 4% every year.
3) social security isn’t factored in. This has a huge impact on portfolios under a couple million.
4) often the EF isn’t part of the portfolio used for SWR calculations
5) many BH folks will own their own home by the time they retire. That’s not part of the SWR calculation.

I’m too lazy to retype the OPs spreadsheet but I bet the 4% rule doesn’t fail given even a couple of these common safety factors.
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Re: The Day the 4% Rule Died

Post by smitcat »

Marseille07 wrote: Thu Jun 16, 2022 8:38 pm
marcopolo wrote: Thu Jun 16, 2022 8:28 pm The big difference is the planned cutbacks based on portfolio performance.
I think we had this discussion before.
You seem very rigid in your approach, down to monthly spending limits, if i recall that exchange correctly.
We take a much more relaxed attitude. We are perfectly fine blowing through the spending goals in any given month, or any given year. We view it more as a longer term running average.
Perhaps i misunderstood your approach.
I'm perfectly fine blowing through the spending goals in any given month too, it's just that I'd go into austerity mode for several months while my AA is restored.

Not sure how else you do after buying a 40K car all cash, for example.
"Not sure how else you do after buying a 40K car all cash, for example."
We have added a number for lumpy expenses in our running spending budget - cars, big ticket home, etc.
While we are absolutely sure that the number for 'lumps' is not correct ...it will be close enough for our use based on history
randomguy
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Re: The Day the 4% Rule Died

Post by randomguy »

nigel_ht wrote: Fri Jun 17, 2022 8:52 am
Glenn wrote: Thu Jun 16, 2022 8:06 pm I think such hypothetical discussions of the "4% rule" are worthless. That guideline is useful to try to figure out if you likely have enough to retire on, but does anyone actually follow it mindlessly? I used it as a guideline when I retired 13 years ago, but never expected to simply withdraw an inflation-adjusted 4% automatically, year-after-year, even as my portfolio tanked. Has anyone?

In retirement, do what you presumably did pre-retirement: stay flexible. Thinking you're going to simply take 4%, inflation-adjusted, in the face of ever-changing financial conditions, is just foolish.
Some folks need all of that 4% to meet expenses…so success or failure of the 4% rule is relevant to them.

Knowing when and how something fails is a good thing. It’s still a good planning rule of thumb and there are many safety factors built in for folks that use them:

1) many folks pad their expenses with discretionary. That gives then a little flexibility if things are really bad.
2) even with the discretionary added in many BHer don’t need to spend the full 4% every year.
3) social security isn’t factored in. This has a huge impact on portfolios under a couple million.
4) often the EF isn’t part of the portfolio used for SWR calculations
5) many BH folks will own their own home by the time they retire. That’s not part of the SWR calculation.

I’m too lazy to retype the OPs spreadsheet but I bet the 4% rule doesn’t fail given even a couple of these common safety factors.
SS is factored in. It is why you need 40k instead of 80k. Owing a house is factored in. It is why you need 80k instead of 100k. Your EF giving you 6 more months doesn't really move the needle. And yes if you have a 3.5% SWR, it doesn't matter if the 4% rule fails. So now we are left talking flexibility. No doubt cutting spending is the answer to poor returns. The question is by how much and for how long.

It is easy to say be flexible. But it is March 2009, how flexible do you need to be? Are you going to make a 10k cut by skipping that vacation or are you going to make a 10k/year cut by selling your house? And when do you do you make that choice? If the actual SWR over the next 30 years is 2%, I probably need to sell my house in order to optimize my use of my money. In my 120k budget (80k from investments, 40k from SS), I would have to cut too much to live on 80k/year for 20+ years with my current level of house. I would want to cut the amount of assets dedicated to house by quite a bit. I like those extra bedrooms/space I have more than taking 5 trips/year instead of 4. I don't like them more than taking 2 trips instead of 0.....
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

smitcat wrote: Fri Jun 17, 2022 9:36 am "Not sure how else you do after buying a 40K car all cash, for example."
We have added a number for lumpy expenses in our running spending budget - cars, big ticket home, etc.
While we are absolutely sure that the number for 'lumps' is not correct ...it will be close enough for our use based on history
Actually I do budget a car too. But here is the problem, it just becomes a number, something like $200 out of my $5000/mo budget, for example.

In other words, if I were spending $5000/mo in full every month on other stuff, then I'm actually spending the amount budgeted for a car. But setting aside the car budget every month for a decade is mundane. So...my current approach is to simply take a hit on fixed income to pay for the car, then replenish fixed income over time.
smitcat
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Re: The Day the 4% Rule Died

Post by smitcat »

Marseille07 wrote: Fri Jun 17, 2022 9:52 am
smitcat wrote: Fri Jun 17, 2022 9:36 am "Not sure how else you do after buying a 40K car all cash, for example."
We have added a number for lumpy expenses in our running spending budget - cars, big ticket home, etc.
While we are absolutely sure that the number for 'lumps' is not correct ...it will be close enough for our use based on history
Actually I do budget a car too. But here is the problem, it just becomes a number, something like $200 out of my $5000/mo budget, for example.

In other words, if I were spending $5000/mo in full every month on other stuff, then I'm actually spending the amount budgeted for a car. But setting aside the car budget every month for a decade is mundane. So...my current approach is to simply take a hit on fixed income to pay for the car, then replenish fixed income over time.
I am sure that works well also - we just have a yearly number for lumpy which was derived from our past history of 'lumps' along with our current status.
If our home had imminent needs for larger expenses we would adjust the starting number up.
If our vehicles had a shorter horizon for repairs/replace we would adjust the starting number up.
If our other lumpy costs had a short horizon for repairs/replace we would adjust the starting number up.

Budgeting monthly is not something that we watch.
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

smitcat wrote: Fri Jun 17, 2022 9:59 am I am sure that works well also - we just have a yearly number for lumpy which was derived from our past history of 'lumps' along with our current status.
If our home had imminent needs for larger expenses we would adjust the starting number up.
If our vehicles had a shorter horizon for repairs/replace we would adjust the starting number up.
If our other lumpy costs had a short horizon for repairs/replace we would adjust the starting number up.

Budgeting monthly is not something that we watch.
Oh, then I'm probably doing something similar:
For example, if my portfolio were 2M running 90/10 (1.8M/200K), I raise my fixed income target to be 220K~240K
For planned expenses, this would be my approach.
smitcat
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Re: The Day the 4% Rule Died

Post by smitcat »

Marseille07 wrote: Fri Jun 17, 2022 10:08 am
smitcat wrote: Fri Jun 17, 2022 9:59 am I am sure that works well also - we just have a yearly number for lumpy which was derived from our past history of 'lumps' along with our current status.
If our home had imminent needs for larger expenses we would adjust the starting number up.
If our vehicles had a shorter horizon for repairs/replace we would adjust the starting number up.
If our other lumpy costs had a short horizon for repairs/replace we would adjust the starting number up.

Budgeting monthly is not something that we watch.

Code: Select all

Oh, then I'm probably doing something similar:
[quote]For example, if my portfolio were 2M running 90/10 (1.8M/200K), I raise my fixed income target to be 220K~240K[/quote]

For planned expenses, this would be my approach.
"Oh, then I'm probably doing something similar:
For example, if my portfolio were 2M running 90/10 (1.8M/200K), I raise my fixed income target to be 220K~240K
For planned expenses, this would be my approach."

I guess we are doing near the same thing ....but we are retired already. Our expense budget has these 'lumps' already in it and we will adjust as necessary if and when it is required. We have no plans to add to the fixed income side.
nigel_ht
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Re: The Day the 4% Rule Died

Post by nigel_ht »

randomguy wrote: Fri Jun 17, 2022 9:51 am
nigel_ht wrote: Fri Jun 17, 2022 8:52 am
Glenn wrote: Thu Jun 16, 2022 8:06 pm I think such hypothetical discussions of the "4% rule" are worthless. That guideline is useful to try to figure out if you likely have enough to retire on, but does anyone actually follow it mindlessly? I used it as a guideline when I retired 13 years ago, but never expected to simply withdraw an inflation-adjusted 4% automatically, year-after-year, even as my portfolio tanked. Has anyone?

In retirement, do what you presumably did pre-retirement: stay flexible. Thinking you're going to simply take 4%, inflation-adjusted, in the face of ever-changing financial conditions, is just foolish.
Some folks need all of that 4% to meet expenses…so success or failure of the 4% rule is relevant to them.

Knowing when and how something fails is a good thing. It’s still a good planning rule of thumb and there are many safety factors built in for folks that use them:

1) many folks pad their expenses with discretionary. That gives then a little flexibility if things are really bad.
2) even with the discretionary added in many BHer don’t need to spend the full 4% every year.
3) social security isn’t factored in. This has a huge impact on portfolios under a couple million.
4) often the EF isn’t part of the portfolio used for SWR calculations
5) many BH folks will own their own home by the time they retire. That’s not part of the SWR calculation.

I’m too lazy to retype the OPs spreadsheet but I bet the 4% rule doesn’t fail given even a couple of these common safety factors.
SS is factored in. It is why you need 40k instead of 80k.
Owing a house is factored in. It is why you need 80k instead of 100k.
Eh, depends on how you do it but I haven't seen SS and home ownership factored in very often. Its usually something like "I have a $2M portfolio and I'm going to live on $80K gross".

You can do so in cFIRESim. Well the social security part anyway.
Your EF giving you 6 more months doesn't really move the needle.
Some folks have more than 6 months EF. Some folks have none because their portfolio is their EF.
And yes if you have a 3.5% SWR, it doesn't matter if the 4% rule fails. So now we are left talking flexibility. No doubt cutting spending is the answer to poor returns. The question is by how much and for how long.

It is easy to say be flexible. But it is March 2009, how flexible do you need to be? Are you going to make a 10k cut by skipping that vacation or are you going to make a 10k/year cut by selling your house? And when do you do you make that choice? If the actual SWR over the next 30 years is 2%, I probably need to sell my house in order to optimize my use of my money. In my 120k budget (80k from investments, 40k from SS), I would have to cut too much to live on 80k/year for 20+ years with my current level of house. I would want to cut the amount of assets dedicated to house by quite a bit. I like those extra bedrooms/space I have more than taking 5 trips/year instead of 4. I don't like them more than taking 2 trips instead of 0.....
If you are depending on SS to make ends meet what were you doing until SS kicked in? Were you simply spending $120K instead of $80K the first N years? That's not really following 4% SWR...

But lets run it in CFireSim

https://www.cfiresim.com/66bd4643-4457- ... 26d8f2367d

SWR with $40K SS starting 5 years after retirement allows you to have a $110,852 spend. Your $120K spend is historically over budget if you want 100% success rate.

A $120K spend rate has only an 84% success rate:

https://www.cfiresim.com/94b647f7-9210- ... 42fa7eba61

The 2% outcome is sufficiently unlikely that I don't specifically plan for it. It's in the general bucket of "Something has gone terribly wrong...see if any of the exit strategies still work".

Keeping a separate go-go budget is how I intend to avoid needing to decide if we need to cancel travel in the early years if we hit SORR. Then, if I can LBYM on the income that my portfolio has historically been able to generate - some safety fudge factor, I'm unlikely to ever need to be flexible.

That probably means I can't afford a $120K lifestyle or I need to save more to afford a $120K lifestyle.

What I don't like about the "be flexible" mindset is generally it means "spend what you want now and be flexible later if you need to be" where nobody really expects to actually need to cut back later. And I get it since the odds are you don't need to cut back later...but I'm still pretty tired of folks who want to tell me that I still need to be flexible with 100% historical success rate + fudge factor + SS + home equity.

Nope. The plan has enough redundancy to the point that if I actually need flexibility the "be flexible" folks are really screwed.
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Re: The Day the 4% Rule Died

Post by randomguy »

nigel_ht wrote: Fri Jun 17, 2022 2:02 pm If you are depending on SS to make ends meet what were you doing until SS kicked in? Were you simply spending $120K instead of $80K the first N years? That's not really following 4% SWR...
Working a job getting paid 150k/year, saving 30k, and spending 120k......

If you oversave enough, any thing works. Imagine I want to retire at 60 instead of 67. Do I save 3 million bucks so I can have that 120k of income? Seems pretty excessive when I could just save 2.3m and replace that 280k of income with a liability portfolio. And yes a lot of people get absurdly conservative between the 2.5% SWR, ignoring SS, ignoring house values, and that 500k we just don't count....
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Re: The Day the 4% Rule Died

Post by nigel_ht »

randomguy wrote: Fri Jun 17, 2022 2:14 pm
nigel_ht wrote: Fri Jun 17, 2022 2:02 pm If you are depending on SS to make ends meet what were you doing until SS kicked in? Were you simply spending $120K instead of $80K the first N years? That's not really following 4% SWR...
Working a job getting paid 150k/year, saving 30k, and spending 120k......

If you oversave enough, any thing works. Imagine I want to retire at 60 instead of 67. Do I save 3 million bucks so I can have that 120k of income? Seems pretty excessive when I could just save 2.3m and replace that 280k of income with a liability portfolio. And yes a lot of people get absurdly conservative between the 2.5% SWR, ignoring SS, ignoring house values, and that 500k we just don't count....
What you are saying is that you're working until 70 or taking SS early and still getting $40K. That's fine but you can't spend 120K a year on a $2M portfolio with SS and have 100% historical success in the CFireSim data set.
randomguy
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Re: The Day the 4% Rule Died

Post by randomguy »

nigel_ht wrote: Fri Jun 17, 2022 2:40 pm
randomguy wrote: Fri Jun 17, 2022 2:14 pm
nigel_ht wrote: Fri Jun 17, 2022 2:02 pm If you are depending on SS to make ends meet what were you doing until SS kicked in? Were you simply spending $120K instead of $80K the first N years? That's not really following 4% SWR...
Working a job getting paid 150k/year, saving 30k, and spending 120k......

If you oversave enough, any thing works. Imagine I want to retire at 60 instead of 67. Do I save 3 million bucks so I can have that 120k of income? Seems pretty excessive when I could just save 2.3m and replace that 280k of income with a liability portfolio. And yes a lot of people get absurdly conservative between the 2.5% SWR, ignoring SS, ignoring house values, and that 500k we just don't count....
What you are saying is that you're working until 70 or taking SS early and still getting $40K. That's fine but you can't spend 120K a year on a $2M portfolio with SS and have 100% historical success in the CFireSim data set.
Yes the 4% rule has a 95% success rate and not a 100% using CFireSim data set and methodology. I don't think anyone is really questioning that.
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Re: The Day the 4% Rule Died

Post by nigel_ht »

randomguy wrote: Fri Jun 17, 2022 3:30 pm
nigel_ht wrote: Fri Jun 17, 2022 2:40 pm
randomguy wrote: Fri Jun 17, 2022 2:14 pm
nigel_ht wrote: Fri Jun 17, 2022 2:02 pm If you are depending on SS to make ends meet what were you doing until SS kicked in? Were you simply spending $120K instead of $80K the first N years? That's not really following 4% SWR...
Working a job getting paid 150k/year, saving 30k, and spending 120k......

If you oversave enough, any thing works. Imagine I want to retire at 60 instead of 67. Do I save 3 million bucks so I can have that 120k of income? Seems pretty excessive when I could just save 2.3m and replace that 280k of income with a liability portfolio. And yes a lot of people get absurdly conservative between the 2.5% SWR, ignoring SS, ignoring house values, and that 500k we just don't count....
What you are saying is that you're working until 70 or taking SS early and still getting $40K. That's fine but you can't spend 120K a year on a $2M portfolio with SS and have 100% historical success in the CFireSim data set.
Yes the 4% rule has a 95% success rate and not a 100% using CFireSim data set and methodology. I don't think anyone is really questioning that.
You can set it to have 100% success rate in the exploration tab for swr
Glenn
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Re: The Day the 4% Rule Died

Post by Glenn »

Some folks need all of that 4% to meet expenses…so success or failure of the 4% rule is relevant to them.
If you need to spend the maximum SWR to meet expenses at the start of retirement, then you've made a big gamble. You are making a 30-year prediction about your expenses, which I, for one, cannot do. Think about changes we've seen over the past 30 years and some of the things we now take for granted as necessities. In 1992, for example, it is quite unlikely that you paid for internet service or cell phone service...both of which are commonly considered necessary expenses today. Who knows what will be "necessary" expenses in 2052? Better to recognize that life requires adapting as times change.
randomguy
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Re: The Day the 4% Rule Died

Post by randomguy »

nigel_ht wrote: Fri Jun 17, 2022 4:29 pm
You can set it to have 100% success rate in the exploration tab for swr
I am not sure what you are going for. Of course you can use a 100% instead of the 95% that is normally used if you want. Slightly less spending is always more conservative. I would suggest worrying about if 3.8% or 4.1% is the number is looking for far more accuracy than the data can provide. If your scheme is off by 10%+ of historical numbers, we can talk about being too optimistic or pessimistic. Inside of that we are in a realm of somewhat reasonable numbers.
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Re: The Day the 4% Rule Died

Post by nigel_ht »

randomguy wrote: Fri Jun 17, 2022 6:41 pm
nigel_ht wrote: Fri Jun 17, 2022 4:29 pm
You can set it to have 100% success rate in the exploration tab for swr
I am not sure what you are going for. Of course you can use a 100% instead of the 95% that is normally used if you want. Slightly less spending is always more conservative. I would suggest worrying about if 3.8% or 4.1% is the number is looking for far more accuracy than the data can provide. If your scheme is off by 10%+ of historical numbers, we can talk about being too optimistic or pessimistic. Inside of that we are in a realm of somewhat reasonable numbers.
100% covers the historical worst cases. 95% does not.

I do not worry or need false accuracy. It’s just the maximum safe value based on the data available and when making comparisons to other methods you want them all as close to the same success rate as possible.

That’s also why I try to use the same tool or dataset when making comparisons.
randomguy
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Re: The Day the 4% Rule Died

Post by randomguy »

nigel_ht wrote: Fri Jun 17, 2022 8:37 pm
randomguy wrote: Fri Jun 17, 2022 6:41 pm
nigel_ht wrote: Fri Jun 17, 2022 4:29 pm
You can set it to have 100% success rate in the exploration tab for swr
I am not sure what you are going for. Of course you can use a 100% instead of the 95% that is normally used if you want. Slightly less spending is always more conservative. I would suggest worrying about if 3.8% or 4.1% is the number is looking for far more accuracy than the data can provide. If your scheme is off by 10%+ of historical numbers, we can talk about being too optimistic or pessimistic. Inside of that we are in a realm of somewhat reasonable numbers.
100% covers the historical worst cases. 95% does not.

I do not worry or need false accuracy. It’s just the maximum safe value based on the data available and when making comparisons to other methods you want them all as close to the same success rate as possible.

That’s also why I try to use the same tool or dataset when making comparisons.
Yes and most people since trinity use 95%. Feel free to us 100% and talk about the 3.75% rule. It doesn't really matter. We are down at the point where minor difference (10 years versus corporate, TSM versus S&P 500, CRSP versus Wilshire 5000 versus Russel 3000, taking money out monthly/yearly, Start at 1920 or 1800, having .04% or .02% ers, monthly vs daily vs yearly starts) in the methodology show up.
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Re: The Day the 4% Rule Died

Post by JBTX »

Only time will tell whether 4% works. Chances are it will, but my take over the past few years is the probability of success is lower than your average history. Up until recently you had record low interest rates (lower bond returns) and near record high PEs (lower long term stock returns). While anything can happen logically it would be assumed odds of success are lower. In all the historical data points I don’t think there were any 30 year starting points with both very high PEs and very low interest rates.

Now that stocks are down 20% and bonds are somewhat closer to historical averages, are the odds better now? Perhaps. But now we have known inflation which adds some uncertainty to the mix.

I suspect 4% probably would work but the theoretical odds of success, which are not known, are too low in my book to rely on it.
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Re: The Day the 4% Rule Died

Post by nigel_ht »

randomguy wrote: Fri Jun 17, 2022 9:23 pm
nigel_ht wrote: Fri Jun 17, 2022 8:37 pm
randomguy wrote: Fri Jun 17, 2022 6:41 pm
nigel_ht wrote: Fri Jun 17, 2022 4:29 pm
You can set it to have 100% success rate in the exploration tab for swr
I am not sure what you are going for. Of course you can use a 100% instead of the 95% that is normally used if you want. Slightly less spending is always more conservative. I would suggest worrying about if 3.8% or 4.1% is the number is looking for far more accuracy than the data can provide. If your scheme is off by 10%+ of historical numbers, we can talk about being too optimistic or pessimistic. Inside of that we are in a realm of somewhat reasonable numbers.
100% covers the historical worst cases. 95% does not.

I do not worry or need false accuracy. It’s just the maximum safe value based on the data available and when making comparisons to other methods you want them all as close to the same success rate as possible.

That’s also why I try to use the same tool or dataset when making comparisons.
Yes and most people since trinity use 95%. Feel free to us 100% and talk about the 3.75% rule. It doesn't really matter. We are down at the point where minor difference (10 years versus corporate, TSM versus S&P 500, CRSP versus Wilshire 5000 versus Russel 3000, taking money out monthly/yearly, Start at 1920 or 1800, having .04% or .02% ers, monthly vs daily vs yearly starts) in the methodology show up.
When you are comparing against 100% methods like constant percentage you don’t want to give SWR a 5% advantage on the withdrawal values.

There isn’t generally a need to compare SWR against itself or other SWR studies unless you can replicate that for the variable methods.

I suppose if you want to try bond tent or something.
nigel_ht
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Re: The Day the 4% Rule Died

Post by nigel_ht »

randomguy wrote: Fri Jun 17, 2022 9:23 pm
nigel_ht wrote: Fri Jun 17, 2022 8:37 pm
randomguy wrote: Fri Jun 17, 2022 6:41 pm
nigel_ht wrote: Fri Jun 17, 2022 4:29 pm
You can set it to have 100% success rate in the exploration tab for swr
I am not sure what you are going for. Of course you can use a 100% instead of the 95% that is normally used if you want. Slightly less spending is always more conservative. I would suggest worrying about if 3.8% or 4.1% is the number is looking for far more accuracy than the data can provide. If your scheme is off by 10%+ of historical numbers, we can talk about being too optimistic or pessimistic. Inside of that we are in a realm of somewhat reasonable numbers.
100% covers the historical worst cases. 95% does not.

I do not worry or need false accuracy. It’s just the maximum safe value based on the data available and when making comparisons to other methods you want them all as close to the same success rate as possible.

That’s also why I try to use the same tool or dataset when making comparisons.
Yes and most people since trinity use 95%. Feel free to us 100% and talk about the 3.75% rule. It doesn't really matter. We are down at the point where minor difference (10 years versus corporate, TSM versus S&P 500, CRSP versus Wilshire 5000 versus Russel 3000, taking money out monthly/yearly, Start at 1920 or 1800, having .04% or .02% ers, monthly vs daily vs yearly starts) in the methodology show up.
When you are comparing against 100% methods like constant percentage you don’t want to give SWR a 5% advantage on the withdrawal values.

There isn’t generally a need to compare SWR against itself or other SWR studies unless you can replicate that for the variable methods.

I suppose if you want to try bond tent or something.
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

nigel_ht wrote: Sat Jun 18, 2022 8:00 am When you are comparing against 100% methods like constant percentage you don’t want to give SWR a 5% advantage on the withdrawal values.

There isn’t generally a need to compare SWR against itself or other SWR studies unless you can replicate that for the variable methods.

I suppose if you want to try bond tent or something.
Keep in mind, if you introduce a spending floor to constant-% then it is no longer a 100% method. It essentially becomes the "ratcheting up" method.
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Re: The Day the 4% Rule Died

Post by nigel_ht »

Marseille07 wrote: Sat Jun 18, 2022 8:32 am
nigel_ht wrote: Sat Jun 18, 2022 8:00 am When you are comparing against 100% methods like constant percentage you don’t want to give SWR a 5% advantage on the withdrawal values.

There isn’t generally a need to compare SWR against itself or other SWR studies unless you can replicate that for the variable methods.

I suppose if you want to try bond tent or something.
Keep in mind, if you introduce a spending floor to constant-% then it is no longer a 100% method. It essentially becomes the "ratcheting up" method.
Lol, given we’re looking for ending portfolios about the same size as the initial portfolio the failure cases are in the Doomsday Happened (tm) category
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

nigel_ht wrote: Sat Jun 18, 2022 8:58 am Lol, given we’re looking for ending portfolios about the same size as the initial portfolio the failure cases are in the Doomsday Happened (tm) category
It's actually riskier than that because 4% SWR failed about 5% of the time; "ratcheting up" would fail 6~8%. For example, let's say 1966 failed for 4% but 1963~1965 succeeded. With ratcheting up, 1963~1965 probably fail.

We lack studies on ratcheting up and we're in a "ignorance is bliss" situation, but this doesn't mean ratcheting up is equally safe because it's not.
randomguy
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Re: The Day the 4% Rule Died

Post by randomguy »

nigel_ht wrote: Sat Jun 18, 2022 8:00 am
When you are comparing against 100% methods like constant percentage you don’t want to give SWR a 5% advantage on the withdrawal values.

There isn’t generally a need to compare SWR against itself or other SWR studies unless you can replicate that for the variable methods.

I suppose if you want to try bond tent or something.
Sure but let's just say I use the modified 4% rule. I take out 4% out til I have 1x left. Then I take out 10%/year. Now I have a 100% success rate also:) The risk of the 4% rule is your run out of money in year 28 or so historically. The risk of the constant percentage is that you fail to generate needed income in year 1-15.

The 100% chance your portfolio goes will not go to zero that you get from lowering the SWR to 3.7% is not the same as the 100% you get from only taking out 4% CP. One is a just what the limited data suggests. The other is a mathematical fact.
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Re: The Day the 4% Rule Died

Post by nigel_ht »

Marseille07 wrote: Sat Jun 18, 2022 9:01 am
nigel_ht wrote: Sat Jun 18, 2022 8:58 am Lol, given we’re looking for ending portfolios about the same size as the initial portfolio the failure cases are in the Doomsday Happened (tm) category
It's actually riskier than that because 4% SWR failed about 5% of the time; "ratcheting up" would fail 6~8%. For example, let's say 1966 failed for 4% but 1963~1965 succeeded. With ratcheting up, 1963~1965 might fail.
The floor was 2.4% ($48K) for $2M starting portfolio using 3% constant percentage withdrawal. Given that the lowest ending portfolio was $1.4M there’s a lot of room before you run out of money…you just might not be able to afford CCRC you wanted…
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Re: The Day the 4% Rule Died

Post by nigel_ht »

randomguy wrote: Sat Jun 18, 2022 11:35 am
nigel_ht wrote: Sat Jun 18, 2022 8:00 am
When you are comparing against 100% methods like constant percentage you don’t want to give SWR a 5% advantage on the withdrawal values.

There isn’t generally a need to compare SWR against itself or other SWR studies unless you can replicate that for the variable methods.

I suppose if you want to try bond tent or something.
Sure but let's just say I use the modified 4% rule. I take out 4% out til I have 1x left. Then I take out 10%/year. Now I have a 100% success rate also:) The risk of the 4% rule is your run out of money in year 28 or so historically. The risk of the constant percentage is that you fail to generate needed income in year 1-15.

The 100% chance your portfolio goes will not go to zero that you get from lowering the SWR to 3.7% is not the same as the 100% you get from only taking out 4% CP. One is a just what the limited data suggests. The other is a mathematical fact.
Once you add a floor to constant percentage it starts having a failure rate…
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

nigel_ht wrote: Sat Jun 18, 2022 11:56 am The floor was 2.4% ($48K) for $2M starting portfolio using 3% constant percentage withdrawal. Given that the lowest ending portfolio was $1.4M there’s a lot of room before you run out of money…you just might not be able to afford CCRC you wanted…
Well that's different than "ratcheting up" I described for 1963~1965 in two major ways:
a) the 1966 failing assumed 4% SWR not 3% constant-%
b) you're describing constant-% + spending floor, which is not the same as "ratcheting up" unless you CPI'ed the floor in your example.

And the worst part is that 2022 is probably worse than 1966; actually we are talking about 2020 or 2021 being the new worst retirement year, since 2021 would have a 7% CPI adjustment then walked into the 2022 crash. Retiring in Jan 2022 isn't as bad, since you get to dodge 2021's CPI.
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McQ
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Re: The Day the 4% Rule Died

Post by McQ »

This morning Brett Arends posted an interview with William Bengen on Marketwatch, titled "Why retiring this year could be a worst case scenario": https://www.marketwatch.com/story/why-r ... =home-page

It's quite apropos this thread.
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
randomguy
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Re: The Day the 4% Rule Died

Post by randomguy »

McQ wrote: Sat Jun 18, 2022 6:05 pm This morning Brett Arends posted an interview with William Bengen on Marketwatch, titled "Why retiring this year could be a worst case scenario": https://www.marketwatch.com/story/why-r ... =home-page

It's quite apropos this thread.
I doubt many people on this board will follow his advice to be conservative and only take out 4.5%.:) I don't think it is really debatable that getting low real returns (and inflation is one of the easiest ways to get that) for the first 10-15 years is how the 4% rule is going to fail. Having a bad 6 months is a start but the question is are we going to get another 9 years+ years? That is the part that nobody can answer.
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Re: The Day the 4% Rule Died

Post by iamblessed »

FactualFran wrote: Wed Jun 15, 2022 9:57 pm
randomguy wrote: Wed Jun 15, 2022 4:10 pm The numbers I have are 92% for 7% and 97% for 6%. I am not sure why you are getting much lower numbers. Either you are using too long of time period (again Lynch was talking about 20 years) or we have slightly different stock data. It doesn't really matter as nominal withdrawal schemes are absurd and 100% stocks is also. The point was Lynch wasn't recommending something 75% higher than what reality. He was off by a bit over 10%. But the question he was answering isn't remotely the one that we all talk about today.
As I wrote in the post: "The following table contains the percentages of starting years that various stock:bond allocations supported 30 years of withdrawals using the historical return and inflation data from 1926 through 1995.[emphasis added]"

The success rate of 85% for withdrawals of 7% of the initial balance for 30 years from a 100% stock portfolio is from Table 1 of the Trinity Study. Table 3 of the article has the success rates for inflation-adjusted withdrawals. The tables also have the success rates for payout periods other than 30 years, including 20 years.
Question for everybody not just the OP. After looking at the Trinity Study posted here. It says 95% success on a 75/25 portfolio at 6% withdrawal. When I try that on FIRECAL I get nothing like those results. I know FIRECAL has more years but the results are not even close. Any ideas why not?
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

iamblessed wrote: Sat Jun 18, 2022 8:06 pm
FactualFran wrote: Wed Jun 15, 2022 9:57 pm
randomguy wrote: Wed Jun 15, 2022 4:10 pm The numbers I have are 92% for 7% and 97% for 6%. I am not sure why you are getting much lower numbers. Either you are using too long of time period (again Lynch was talking about 20 years) or we have slightly different stock data. It doesn't really matter as nominal withdrawal schemes are absurd and 100% stocks is also. The point was Lynch wasn't recommending something 75% higher than what reality. He was off by a bit over 10%. But the question he was answering isn't remotely the one that we all talk about today.
As I wrote in the post: "The following table contains the percentages of starting years that various stock:bond allocations supported 30 years of withdrawals using the historical return and inflation data from 1926 through 1995.[emphasis added]"

The success rate of 85% for withdrawals of 7% of the initial balance for 30 years from a 100% stock portfolio is from Table 1 of the Trinity Study. Table 3 of the article has the success rates for inflation-adjusted withdrawals. The tables also have the success rates for payout periods other than 30 years, including 20 years.
Question for everybody not just the OP. After looking at the Trinity Study posted here. It says 95% success on a 75/25 portfolio at 6% withdrawal. When I try that on FIRECAL I get nothing like those results. I know FIRECAL has more years but the results are not even close. Any ideas why not?
You need to look at Table 3 unless you don't plan to adjust for inflation.
randomguy
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Re: The Day the 4% Rule Died

Post by randomguy »

iamblessed wrote: Sat Jun 18, 2022 8:06 pm Question for everybody not just the OP. After looking at the Trinity Study posted here. It says 95% success on a 75/25 portfolio at 6% withdrawal. When I try that on FIRECAL I get nothing like those results. I know FIRECAL has more years but the results are not even close. Any ideas why not?
Is Firecal, firecalc?
To be clear trinities numbers are for 30 years:
75/25 6% nominal = 95% success rate
75/25 6% real = 68% success rate

In firecalc, I am getting 100% success for 6% nominal and 55% for 6% real.... I would assume the numbers differ because of time periods and slightly different bond/stock indexes...
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Re: The Day the 4% Rule Died

Post by nigel_ht »

McQ wrote: Sat Jun 18, 2022 6:05 pm This morning Brett Arends posted an interview with William Bengen on Marketwatch, titled "Why retiring this year could be a worst case scenario": https://www.marketwatch.com/story/why-r ... =home-page

It's quite apropos this thread.
So an article that where Bengen says you should do take out 4.5% instead of 4.7% because things look dicey is somehow apropos for a thread called “the day the 4% rule died”…

Strikes me that Bengen is saying 4% looks pretty danged good if 4.5% is what you should be doing…

And you haven’t shown that 4% fails in your scenario when you add in social security…
Marseille07
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Re: The Day the 4% Rule Died

Post by Marseille07 »

nigel_ht wrote: Sat Jun 18, 2022 9:39 pm So an article that where Bengen says you should do take out 4.5% instead of 4.7% because things look dicey is somehow apropos for a thread called “the day the 4% rule died”…

Strikes me that Bengen is saying 4% looks pretty danged good if 4.5% is what you should be doing…

And you haven’t shown that 4% fails in your scenario when you add in social security…
Well, I wouldn't get hung up on 4.7% which isn't really the point of the article.

Bengen is all over the map but his message is valid. Imo 4%@60/40 won't work between 2020~2050, i.e. the rule is indeed dead for this particular combination. Of course, we can't know that in 2022, but 2022 so far is basically 1966 on steroids.
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retireIn2020
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Re: The Day the 4% Rule Died

Post by retireIn2020 »

McQ wrote: Sat Jun 18, 2022 6:05 pm This morning Brett Arends posted an interview with William Bengen on Marketwatch, titled "Why retiring this year could be a worst case scenario": https://www.marketwatch.com/story/why-r ... =home-page
It's quite apropos this thread.
And the operative word being "could"!

Every new year "COULD" be the worst scenario! If one plans for the worst, then the worst isn't so bad! Especially after recent years of prosperity!
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Re: The Day the 4% Rule Died

Post by marcopolo »

Marseille07 wrote: Sat Jun 18, 2022 10:30 pm
nigel_ht wrote: Sat Jun 18, 2022 9:39 pm So an article that where Bengen says you should do take out 4.5% instead of 4.7% because things look dicey is somehow apropos for a thread called “the day the 4% rule died”…

Strikes me that Bengen is saying 4% looks pretty danged good if 4.5% is what you should be doing…

And you haven’t shown that 4% fails in your scenario when you add in social security…
Well, I wouldn't get hung up on 4.7% which isn't really the point of the article.

Bengen is all over the map but his message is valid. Imo 4%@60/40 won't work between 2020~2050, i.e. the rule is indeed dead for this particular combination. Of course, we can't know that in 2022, but 2022 so far is basically 1966 on steroids.
That is quite a leap given that the market is about 15% higher today than the start of 2020, plus dividends.

Using PV, it appears a Jan 2020 retiree with a $1M 60/40 VTI/BND portfolio, taking an inflation adjusted (1/12) * 4% each month, and rebalancing quarterly now has portfolio of ~$1.07M nominal (942k real). Not a great start, but hardly predictive of a failed scenario.

https://www.portfoliovisualizer.com/bac ... tion2_1=40
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: The Day the 4% Rule Died

Post by Marseille07 »

marcopolo wrote: Sun Jun 19, 2022 12:11 am
Marseille07 wrote: Sat Jun 18, 2022 10:30 pm
nigel_ht wrote: Sat Jun 18, 2022 9:39 pm So an article that where Bengen says you should do take out 4.5% instead of 4.7% because things look dicey is somehow apropos for a thread called “the day the 4% rule died”…

Strikes me that Bengen is saying 4% looks pretty danged good if 4.5% is what you should be doing…

And you haven’t shown that 4% fails in your scenario when you add in social security…
Well, I wouldn't get hung up on 4.7% which isn't really the point of the article.

Bengen is all over the map but his message is valid. Imo 4%@60/40 won't work between 2020~2050, i.e. the rule is indeed dead for this particular combination. Of course, we can't know that in 2022, but 2022 so far is basically 1966 on steroids.
That is quite a leap given that the market is about 15% higher today than the start of 2020, plus dividends.

Using PV, it appears a Jan 2020 retiree with a $1M 60/40 VTI/BND portfolio, taking an inflation adjusted (1/12) * 4% each month, and rebalancing quarterly now has portfolio of ~$1.07M nominal (942k real). Not a great start, but hardly predictive of a failed scenario.

https://www.portfoliovisualizer.com/bac ... tion2_1=40
I said "we can't know that in 2022." A 25x portfolio doesn't fail after 2 years...I'm talking about 20 years down the line, which is still considered "fail" if it doesn't reach 30 years.

Also, where do I see that the PV sim is increasing withdrawals based on CPI? I poked around but couldn't verify if it is. If they're doing it correctly then they need to be drawing 43K for 2022 and 46K for 2023 (we can't see this today).

I'll give you that Jan 2020 might not be such a bad timing to retire; perhaps Jan 2021 is worse.
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Re: The Day the 4% Rule Died

Post by marcopolo »

Marseille07 wrote: Sun Jun 19, 2022 12:15 am
marcopolo wrote: Sun Jun 19, 2022 12:11 am
Marseille07 wrote: Sat Jun 18, 2022 10:30 pm
nigel_ht wrote: Sat Jun 18, 2022 9:39 pm So an article that where Bengen says you should do take out 4.5% instead of 4.7% because things look dicey is somehow apropos for a thread called “the day the 4% rule died”…

Strikes me that Bengen is saying 4% looks pretty danged good if 4.5% is what you should be doing…

And you haven’t shown that 4% fails in your scenario when you add in social security…
Well, I wouldn't get hung up on 4.7% which isn't really the point of the article.

Bengen is all over the map but his message is valid. Imo 4%@60/40 won't work between 2020~2050, i.e. the rule is indeed dead for this particular combination. Of course, we can't know that in 2022, but 2022 so far is basically 1966 on steroids.
That is quite a leap given that the market is about 15% higher today than the start of 2020, plus dividends.

Using PV, it appears a Jan 2020 retiree with a $1M 60/40 VTI/BND portfolio, taking an inflation adjusted (1/12) * 4% each month, and rebalancing quarterly now has portfolio of ~$1.07M nominal (942k real). Not a great start, but hardly predictive of a failed scenario.

https://www.portfoliovisualizer.com/bac ... tion2_1=40
I said "we can't know that in 2022." A 25x portfolio doesn't fail after 2 years...I'm talking about 20 years down the line, which is still considered "fail" if it doesn't reach 30 years.

Also, where do I see that the PV sim is increasing withdrawals based on CPI? I poked around but couldn't verify if it is. If they're doing it correctly then they need to be drawing 43K for 2022 and 46K for 2023 (we can't see this today).

I'll give you that Jan 2020 might not be such a bad timing to retire; perhaps Jan 2021 is worse.
In the setting, just below the withdrawal amount (set to 3333/mo), is the setting for withdrawals being inflation adjusted.

You made the prediction that 2020-2050 would fail. I agree there is no way to know that now. So, not sure why you would predict that.
Supposedly based on what we have seen the last couple years? My point is that the data so far does not really support that conclusion.


Why else do you think that? Recency bias would be my guess. Just because we have had a few bad months does not mean the worst time ever is just around the corner. But, we do get many people claiming that every time there is a pull back. Someday they will be right. It just might be you...
Once in a while you get shown the light, in the strangest of places if you look at it right.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: The Day the 4% Rule Died

Post by Marseille07 »

marcopolo wrote: Sun Jun 19, 2022 12:28 am In the setting, just below the withdrawal amount (set to 3333/mo), is the setting for withdrawals being inflation adjusted.

You made the prediction that 2020-2050 would fail. I agree there is no way to know that now. So, not sure why you would predict that.
Supposedly based on what we have seen the last couple years? My point is that the data so far does not really support that conclusion.


Why else do you think that? Recency bias would be my guess. Just because we have had a few bad months does not mean the worst time ever is just around the corner. But, we do get many people claiming that every time there is a pull back. Someday they will be right. It just might be you...
Inflation. It wasn't 1929 or 2008 that killed 60/40, it was 1966 and a couple of years before / after.
marcopolo
Posts: 8445
Joined: Sat Dec 03, 2016 9:22 am

Re: The Day the 4% Rule Died

Post by marcopolo »

Marseille07 wrote: Sun Jun 19, 2022 12:35 am
marcopolo wrote: Sun Jun 19, 2022 12:28 am In the setting, just below the withdrawal amount (set to 3333/mo), is the setting for withdrawals being inflation adjusted.

You made the prediction that 2020-2050 would fail. I agree there is no way to know that now. So, not sure why you would predict that.
Supposedly based on what we have seen the last couple years? My point is that the data so far does not really support that conclusion.


Why else do you think that? Recency bias would be my guess. Just because we have had a few bad months does not mean the worst time ever is just around the corner. But, we do get many people claiming that every time there is a pull back. Someday they will be right. It just might be you...
Inflation. It wasn't 1929 or 2008 that killed 60/40, it was 1966 and a couple of years before / after.
Again recency bias. We have had a few quarters of high inflation. I guess it could go on for a decade or more. Oh, and 1964 did not fail for 4%.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: The Day the 4% Rule Died

Post by Marseille07 »

marcopolo wrote: Sun Jun 19, 2022 12:40 am Again recency bias. We have had a few quarters of high inflation. I guess it could go on for a decade or more. Oh, and 1964 did not fail for 4%.
I don't follow the point you're trying to make. We can't know the answer today; you're free to believe that the rule continues working 30 years later. I think the rule is done, but I can't prove or disprove that. It is just my opinion.
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