Heretical comment follows.
I think it's useful to at least consider the possibility that the real anomaly has been the US equity performance for the 20th century. That's the data set that FIRECalc and most other simulations are based on, explicitly or implicitly. When we consider the US geopolitical preeminence and the economic boom that resulted, particularly since WW-II, it's quite easy to argue that this data set (this particular nation in these particular years) is really the likely anomaly. The same holds true, to a lesser extent, for the US business environment and conditions favoring US economic expansion over the last century--they were certainly unusually good when considered in the entire context of human history. So, when someone says that the future years are really going to be "different this time," we should ask if they mean "different from the recent very anomalous 'good years' in this one particular country" (7-10% PA total returns) or "different from what most developed countries in the modern age have experienced" (2-3% total returns)? Put another way--it's very possible that it really was "different this time" for the last century, and now we're going to experience the "normality" most countries have experienced.
By the same token, technological advances or even advances in our understanding of how economic systems function might result in even higher growth rates than those recently experienced. Or, an asteroid could hit us. We don't know
If a person is ever going to retire, they have to make some assumptions. But (IMO) anybody believing they can set up a fixed 40 year ironclad SWR based on history is fooling themselves. Anyone who comes away from FIRECALC believing there's a meaningful difference going forward between a portfolio allocation/withdrawal rate that generates an 80% historic survival rate and one that generates a 95% survival rate might be overestimating the power and precision of the tools and underlying data in forecasting the future.
What's the solution? I don't know. My particular answer has been:
- Continue to work and squirrel away money longer than "the data" says I need to. Quitting work now and possibly returning to the work force in 5-10 years is not a good answer for me for several reasons. But, I downshifted into work that is more psychologically sustainable.
- Plan to take a year-end percentage rather than a fixed percentage adjusted for inflation. I'm going to use 3.0 - 3.5% at first.
- Plan to be flexible. Monitor the buying power of my portfolio and make adjustments if it starts to slip. Adjustments would include lower annual withdrawals and taking more risk. If the buying power climbs, we'll raise withdrawals and/or reduce the risk we take in our portfolio ("risk" being broadly defined: due not only to volatility, but also from higher inflation, long-term reduced equity returns going forward, etc. Figuring out how to do this might be my new "career").
Sorry, no huge revelations in the foregoing observations. We're all in "measure with micrometer, mark it with a grease pencil, cut with an axe" territory, and what we're measuring is a blob of Jello. And the world going forward might be pudding. (italics added)
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