4% rule

[thepalmersinking]

If the portfolio has dividends. Is the 4% rule still valid? Can the amount be adjusted upwards to get the same result.

[W2R]

No, it's 4% including the dividends and capital gains AFAIK.

[RE2Boys]

And taxes

[Blue Collar Guy]

then minus the taxes and living expenses, that my understanding.

[thepalmersinking]

Any backdated experience on whether this rule is valid anymore?

[Blue Collar Guy]

Quote:

Originally Posted by thepalmersinking Any backdated experience on whether this rule is valid anymore?

tons of threads on this stuff, make a pot of coffee and get a pack of smokes, and run your numbers 25 different ways thru the fire calculator its fun take notes, u dont really need the coffee or the cigarettes but thats what i did,

[Montecfo]

4% is gross. You have to also remove management fees/costs if you are incurring those, I understand.

[Major Tom]

Quote:

Originally Posted by thepalmersinking Any backdated experience on whether this rule is valid anymore?

Sure. Enter your details into Firecalc, set a retirement period of 30 years, a portfolio mix with 60% equities, and use the "Investigate" tab to look for a spending level that will result in a 95% success rate. With my numbers, Firecalc gave me a spending level that actually resulted in a 95.7% success rate. This represented a WR of 4.02%.

Firecalc is updated every year, so this would seem to indicate that the 4% "rule" (for which I read "guideline") is still good. At least it is, considering past results, which is the best anyone can do.

[Meadbh]

Quote:

Originally Posted by Blue Collar Guy tons of threads on this stuff, make a pot of coffee and get a pack of smokes, and run your numbers 25 different ways thru the fire calculator its fun take notes, u dont really need the coffee or the cigarettes but thats what i did,

If you smoke enough, you will die before you run out of money!

[mickeyd]

Quote:

Is the 4% rule still valid?

It's not really a rule, so feel free to pick your own amount.

[OldShooter]

Quote:

Originally Posted by mickeyd It's not really a rule, so feel free to pick your own amount.

A useful thing I learned long ago: "To every complex problem there is a simple solution, usually wrong."

IMO 4% is a good rule of thumb when thinking about spending and portfolios, but it is only that. There are many things that would cause one to tweek the number up or down, including portfolio construction, market behaviors, life expectancy, etc.

It doesn't consider spending needs, either. Early in retirement spending might be higher for travel or other fun. Later spending might go down as you stay at home more. Or it might go up with medical issues.

We spend well under 4%, which makes me feel fairly comfortable.

[WoodsWalker]

I came across a very short, intelligent book called "The 4% Rule and Safe Withdrawal Rates In Retirement by Todd R. Tresidder". It convinced me that 4% rule may not work in the future. I'm hoping to retire next year, counting on 2%, to be very conservative.
I've read several books on retirement so far, this was the gloomiest but also convincing. As Yogi Berra said: "'It's tough to make predictions, especially about the future"' and I don't want any nasty surprises (running short of funds) in 20 years.

[USGrant1962]

Quote:

Originally Posted by mickeyd It's not really a rule, so feel free to pick your own amount.

It's more of a guideline.

https://www.youtube.com/watch?v=6GMkuPiIZ2k

[Totoro]

Quote:

Originally Posted by Montecfo 4% is gross. You have to also remove management fees/costs if you are incurring those, I understand.

The Trinity study includes 1% fees I believe. Also, it actually was 4.5%.

[audreyh1]

Quote:

Originally Posted by Totoro The Trinity study includes 1% fees I believe. Also, it actually was 4.5%.

No fees considered in the Trinity study - it was pure indexes.

And the 4.5% was from a different study - SAFEMAX (Bengen). I don't believe this one considered fees either.

The only study I've seen that considered 1% fees was Pfau's work, and he came up with a much lower safe withdrawal rate also due to more pessimistic market outlook projected from recent market history.

[kcowan]

Quote:

Originally Posted by Meadbh If you smoke enough, you will die before you run out of money!

Don't count on it! MIL died at 93 with lung cancer. Her RIF was down to $24000. Pretty close!

[Totoro]

Quote:

Originally Posted by audreyh1 No fees considered in the Trinity study - it was pure indexes. And the 4.5% was from a different study - SAFEMAX (Bengen). I don't believe this one considered fees either. The only study I've seen that considered 1% fees was Pfau's work, and he came up with a much lower safe withdrawal rate also due to more pessimistic market outlook projected from recent market history.

I was wrong, indeed no fees in Trinity nor Bengen, was confusing the three items above. The 4.5% by Bengen actually was his second study, the first one was 4.15% or thereabouts.

Anyway, thanks for correcting.

[Blue Collar Guy]

Quote:

Originally Posted by WoodsWalker I came across a very short, intelligent book called "The 4% Rule and Safe Withdrawal Rates In Retirement by Todd R. Tresidder". It convinced me that 4% rule may not work in the future. I'm hoping to retire next year, counting on 2%, to be very conservative. I've read several books on retirement so far, this was the gloomiest but also convincing. As Yogi Berra said: "'It's tough to make predictions, especially about the future"' and I don't want any nasty surprises (running short of funds) in 20 years.

[LOL!]

Quote:

Originally Posted by thepalmersinking Any backdated experience on whether this rule is valid anymore?

https://earlyretirementnow.com/2016/...-part-1-intro/

is recent, complete, well-researched, and the real deal.

[Blue Collar Guy]

Quote:

Originally Posted by LOL! https://earlyretirementnow.com/2016/...-part-1-intro/ is recent, complete, well-researched, and the real deal.

thank you