HootingSloth wrote: ↑Thu Jun 16, 2022 11:37 am
nigel_ht wrote: ↑Thu Jun 16, 2022 11:29 am
HootingSloth wrote: ↑Thu Jun 16, 2022 11:17 am
alpine_boglehead wrote: ↑Thu Jun 16, 2022 10:43 am
HootingSloth wrote: ↑Thu Jun 16, 2022 10:21 am
This is just demonstrably false. The "safe" withdrawal rate for a German investor living through the early 20th century holding, say, German real estate and a globally-diversified portfolio of stocks and bonds was effectively zero and certainly less than 1%. Yet, many Germans survived both wars and continued to live their lives. Many of their children and grandchildren prospered. Flexibility can deal with failure scenarios that are
much, much more severe than a sub 3% withdrawal rate. Humans are much more adaptable, and the
full range of potential future outcomes is much wider, than you suppose.
You're both right. If the SWR dips below 3%, financial flexibility might be unable to the problem. Life flexibility can (as in many Germans and Austrians, luckily such as my grandparents, surviving and rebuilding). But these were really, really tough times. A distant relative recently recounted how he survived in WWII Vienna as a young boy. This is a different level of flexibility from "due to continued high inflation in the 2020s, my portfolio only supported a 2.35% withdrawal rate and I had to sell my jetskis".
We'll have to deal with what life throws at us. Make a good plan (appropriate portfolio for your situation), execute it, and if it fails, make a new one. If that means "welcome to Walmart" on weekday afternoons or growing your own potatoes on an unused patch in the neighborhood - we'll struggle through.
I fully agree. There is a whole spectrum of possible outcomes from "Oh well, it turned out 3.7% or 2.9% or whatever was the realized SWR for this time period" to "Financial assets proved wholly worthless in solving the scope of problems."
So you “fully agree” that 4% SWR + social security and a paid off house doesn’t fail…as in doesn’t “require flexibility” within that reasonable spectrum of “3.7-2.9%” outcomes?
Because your whole “demonstrably false” rejoinder comes from that other category.
What is demonstrably false is that flexibility cannot deal with a sub 3% withdrawal rate.
But that’s not the point. The point is that you don’t need flexibility using SWR when you add in SS and home ownership.
Sometimes the required flexibility is spending 2.9%, or 2.2%, or whatever, instead of 3%.
You need to find me a 2.2% scenario that plausibly happens without needing to re-evaluate everything else…fall of the American Empire? Sure. Lose reserve currency status and I’m going overweight global with whatever we have left.
Lose superpower status and I’m looking at exit strategies.
It is far more likely for your expenses to double than for a 2.2% SWR scenario.
Sometimes the required changes are more dramatic. There is no need to pick a minimum number and act like it is a floor. There is no floor, and life may mean you need to adjust, whether by formula or ad hoc.
I look at two most likely scenarios and a most dangerous scenario for planning purposes.
Estimating my expenses is part of that process and that’s a minimum floor number before more “rigorous” contingency plans are required. Like selling the house and downsizing more.
nigel_ht wrote: ↑Thu Jun 16, 2022 10:45 am
It’s a product of having one parent who survived by running from the Japanese and Communists (many perhaps most classmates died).
It seems we have more in common than many, although running was not always an option, and some survived occupation without running.
Lol…well unless they were members of the Communist elite they didn’t fare too well.
If you were “landlord class” with Nationalist ties running with whatever portable wealth you still had was the right move if you could swing it…
It’s all luck. My dad told me about how he was on the last 2 airplanes out of some city. His flew to some smaller city on the coast. The other flew to Shanghai. His made it. The other didn’t.
Got to the US with little more than the shirt on his back.
He also told me that gold has value way out of proportion to what it should when you need to get the hell out of dodge…