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Old 05-21-2008, 05:42 AM   #41
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Where does this guideline come from?

Seems like I've seen references to 3 or 4 % references in various other threads and posts.

Is this a consensus or one opinion?
To quote Dory36, the guy who wrote the FIRECalc program:

The "4% Rule" is shorthand for a lot of research by a lot of different people that finds, in general, long term withdrawals are sustainable if they are roughly 4% of the portfolio, when there are no other sources of funds (Social Security, etc.) and no variations in the spending throughout the retirement.

The source of the 4% rule is research done about ten years ago and published in the Trinity Study. Here is an old thread that discusses it in some detail:

http://www.early-retirement.org/foru...ate-19234.html
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Old 05-21-2008, 12:37 PM   #42
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If you're living expenses are under 4%, would you withdraw 3% or still withdraw 4% but reinvest the remainder or better to leave what you don't need in existing investments?
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Old 05-21-2008, 12:55 PM   #43
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If I could live the way I wanted to withdrawing less than 4%, I would do so. It will make your heirs very happy.
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Old 05-21-2008, 02:08 PM   #44
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If I could live the way I wanted to withdrawing less than 4%, I would do so. It will make your heirs very happy.
We could call those lifestyles "With the Class A" and "Without the Class A".

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Originally Posted by explanade View Post
If you're living expenses are under 4%, would you withdraw 3% or still withdraw 4% but reinvest the remainder or better to leave what you don't need in existing investments?
See, that's the neat thing about the 4% thumbrule-- it's your choice. If you're younger then you might choose to reinvest and sleep more soundly at night. If you're older (or with less than 30 years to live!) then you can probably spend it without a second thought to enjoy experiences that will guarantee that you'll sleep more soundly at night...

Another consideration would be putting the excess in a charitable remainder trust that would generate "just in case" income while funding your legacy. The challenge is finding a CRT you care to fund (although many non-profits would be happy to help you in your quest) that would take the donation in small increments over a number of years.
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Old 05-21-2008, 03:27 PM   #45
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We could call those lifestyles "With the Class A" and "Without the Class A".
Yep. "With the Prius" and "Without the Prius" works, too - although on a slightly different level...
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Old 05-21-2008, 06:07 PM   #46
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Yep. "With the Prius" and "Without the Prius" works, too - although on a slightly different level...
How big is the luggage bin on your Class A? Does it have wheel ramps?
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Old 07-30-2008, 08:20 AM   #47
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I thought I would update everyone on my progress towards ER, as well as keep a record for myself of my financial situation, as well as keep me motivated for the future.

Current financial situation:
Assets:$220k (divided in stocks, money markets)
Liabilities: $15k (low yield student loans)
Income: $135k/yr

Recently got bonus so assets shot up a little.

I've still got my eye on that 30 goal.
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Old 08-04-2008, 03:59 PM   #48
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I say accumulate while you can. You may burn out and it may not be tons of fun - but if you can sock away enough for a few years, it will be worth it. It is only a few years. Hell, I am working a job I hate for a few years for only a few paltry thousand dollars more!
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Old 08-04-2008, 05:29 PM   #49
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Originally Posted by explanade View Post
Where does this guideline come from?

Seems like I've seen references to 3 or 4 % references in various other threads and posts.

Is this a consensus or one opinion?
It is opinion which is based on consensus, backtesting (monte carlo) and a number of assumptions based on spending and asset allocation.

But the guideline persists through most planning efforts.

4% is 25X current expenses
I would not start detailed planning (choosing dates) until you have 12X in the bank- at that point you have one double to go (money needs to double once and you are at the goal).
Even 25X may not be enough for a long retirement. What is long to you might be normal for someone else. IMO 4%/25X will last for about 35 years. If you retire early, you will probably use a lower percentage (I use 3%/33X).
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Old 08-04-2008, 05:31 PM   #50
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Originally Posted by Bankerwithabrain View Post
I thought I would update everyone on my progress towards ER, as well as keep a record for myself of my financial situation, as well as keep me motivated for the future.

Current financial situation:
Assets:$220k (divided in stocks, money markets)
Liabilities: $15k (low yield student loans)
Income: $135k/yr

Recently got bonus so assets shot up a little.

I've still got my eye on that 30 goal.
One point- I read on previous page you are looking at 1.5 M at age 30... but others said you would need 3 M+ because of kids and education. My comment would be if you could hit 1.5M at 30, you could let that money ride for about 7 more years and have your 3 M at age 37 or 38 without much furtner contributions- consider then downsizing career at age 30 to something more to your liking (you would not need to save so much).
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Old 10-06-2010, 04:26 AM   #51
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I started this thread 2.5 years ago and wanted to update where I am now.

I was laid off from my Investment Banking job during the crisis so the decision to leave the intense work life wasn't really my choice. I now work for another finance job with much better lifestyle but also much worse pay.


My current financial situation:
Assets:$320k (divided in stocks, money markets)
Liabilities: $10k (low yield student loans)
Income: $80k/yr

I am now 27 and don't see any chance of reaching that $1 million mark by 30. Definitely not that $4 million mark everyone suggested.

Sad...
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Old 10-06-2010, 05:00 AM   #52
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Oh well, it might be sad in one way but good for you in another.
In Germany we say "wie gewonnen, so zerronnen" (as it was gained it will be lost).
So if we gain something very quickly we will probably lose it quickly, too.

You have a job with regular not bad income and you are financially ahead of a lot of your peers.
The crisis has given you a chance to develop a more healthy lifestyle and a better relationship with money. It has also taught you about unpredictabilities in life.

All the best to you!
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Old 10-06-2010, 05:04 AM   #53
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I thought the financial industry gave out the biggest bonuses in history last year.

This year it's suppose to be even bigger.
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Old 10-06-2010, 08:48 AM   #54
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value life before setting really high savings goals.

This life is the only one you have. Enjoy it.
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Old 10-06-2010, 09:31 AM   #55
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I thought the financial industry gave out the biggest bonuses in history last year.

This year it's suppose to be even bigger.

They also laid off a LOT of people... not as many deals to do... more money for the people who were left...
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Old 10-06-2010, 10:06 AM   #56
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Sad? Come on, you are richer than most everyone your age. You have a job that pays decently and has a better lifestyle than your prior job. I don't feel the least bit bad that you won't have a million by the time you are 30.
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Old 10-06-2010, 10:09 AM   #57
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Sad! Come on, you are richer than most everyone your age. You have a job that pays decently and has a better lifestyle than your prior job. I don't feel the least bit bad that you won't have a million by the time you are 30.
Martha, you have no empathy for the downtrodden in our midst. What has gotten into you?

Ha
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Old 10-06-2010, 10:30 AM   #58
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Sad! Come on, you are richer than most everyone your age. You have a job that pays decently and has a better lifestyle than your prior job. I don't feel the least bit bad that you won't have a million by the time you are 30.
I was about to chime in with basically the same thought, only much stronger. OK, I'll do it anyway:

OP, you've got your priority all mixed up! It's time to look at other aspects of life. Money is important, very important, but not that important. Besides, as Martha pointed out, you're already doing extremely well for your age. Enjoy your new, more peaceful, less stress job. So what if you retire at 40 instead of sooner. Use the available free time now to learn to surf or whatever you want to do to enjoy yourself NOW. Don't wait until you're retired.

Sorry for the strong words. Reading your posts, I could not help getting the feeling of admiration and contempt at the same time.
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Old 10-06-2010, 10:43 AM   #59
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I was about to chime in with basically the same thought, only much stronger. OK, I'll do it anyway:

OP, you've got your priority all mixed up! It's time to look at other aspects of life. Money is important, very important, but not that important. Besides, as Martha pointed out, you're already doing extremely well for your age. Enjoy your new, more peaceful, less stress job. So what if you retire at 40 instead of sooner. Use the available free time now to learn to surf or whatever you want to do to enjoy yourself NOW. Don't wait until you're retired.

Sorry for the strong words. Reading your posts, I could not help getting the feeling of admiration and contempt at the same time.
I see you favor admonishment over comedy. And there is nothing wrong with that at all.

Ha
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Old 10-06-2010, 10:52 AM   #60
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Doesnt' matter what your age: if you've got FIRE fever, and your plans evaporate, it's a sad day. Keep on chuggin', my friend. You'll get there.
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