Say Goodbye to the 4% Rule - tips from the WSJ

[nun]

Didn't see anything new in the linked WSJ article. The analysis and proposal by W. Pfau has been discussed here before as well.

I don't see anything new in W. Pfau's enthusiasm for annuities as I've always had a deferred annuity in my retirement portfolio. Even as I paid into 401ks etc I always planned to use a combination if annuities, SS, and rental income to fund my retirement.

 

[ziggy29]

I'm sorry, you gotta splain me that one. We feed our dog one of the top three, but it's still crunchy, and he [-]likes[/-] loves it. Been a while since we've had a cat, but friends who do (including a couple vets) feed em crunchy cat food too.

Keep in mind that she never disclosed whether moist/canned cat food was Plan E or Plan G...

 

[NotMyFault]

Annuities rank right up there with the "crunchy" cat food in my retirement plans, say around Plan F or so. Wade Pfau is too young to feel the way he does, IMHO.

Dry cat food has no expiration date so buy now to beat inflation.

 

[ziggy29]

Dry cat food has no expiration date so buy now to beat inflation.

You could say the same for Twinkies, though I suspect "buy and hold" of Twinkies a year ago could be rather profitable.

 

[rayvt]

Um, no. I once tucked away some Twinkies in the back of my desk drawer for a hunger-emergency.

After about a year, Twinkies turn green and fuzzy.

 

[Sarah in SC]

I'm sorry, you gotta splain me that one. We feed our dog one of the top three, but it's still crunchy, and he [-]likes[/-] loves it. Been a while since we've had a cat, but friends who do (including a couple vets) feed em crunchy cat food too.

Tyro

LOL, I mean ME eating the crunchy cat food! The cats and dogs like it just fine!

 

[Tyro]

Dry cat food has no expiration date so buy now to beat inflation.

Actually, it does, but we do stock up when dog food goes on sale (up to that date).
However being her plan F, I'm not convinced that's what Sarahbear meant.

Tyro

Edit: Oopsus Crosspostus I've tried both (dry cat & dog foods), and I think I'd have to go with...

​

Tyro​

 

[JoeWras]

We feed our cat crunchy food. Am I supposed to feed him annuities now? Man, I'm getting confused.

 

[NotMyFault]

We feed our cat crunchy food. Am I supposed to feed him annuities now? Man, I'm getting confused.

Now that's funny

 

[Sarah in SC]

Now that's funny

+1 But must add, if you are feeding annuities to the cats, please feed annuity salesmen to the dogs!

 

[pb4uski]

....feed annuity salesmen to the dogs!

GREAT idea!!! It's a dog-eat-dog world out there.

 

[braumeister]

Crunchy is fine with me.
DW buys those big 50 pound sacks of Hubby Chow and just pours some in my bowl, next to my beer stein. Saves so much time and effort!

 

[samclem]

Remember the risk of that Purina Diet.

 

[Lisa99]

We will be well above 4% in our first years of retirement then will drop well below when some other income streams besides our investment portfolio become available.

I consistently fail to understand why people take 4% as 'though shalt never cross that line." Having a financial plan, knowing where your income is coming from and knowing how to adjust when needed is of far more interest to me than knowing that 4% might not be safe after all.

 

[pb4uski]

We will be well above 4% in our first years of retirement then will drop well below when some other income streams besides our investment portfolio become available.

I consistently fail to understand why people take 4% as 'though shalt never cross that line." Having a financial plan, knowing where your income is coming from and knowing how to adjust when needed is of far more interest to me than knowing that 4% might not be safe after all.

+1 It is the "ultimate" WR (once SS, pensions, etc come on-line) that one should focus on. In many cases it will be higher prior to those sources coming on-line.

 

[gerrym51]

Clearly annuities have been discussed many times here. They have many pros and cons i.e. no money left for heirs, etc which I will not repeat. However, from a pure mathematical standpoint, some annuities do make sense in some cases. In my case, my Excel ER model is optimized with the purchase of some deferred annuities up to my mid 50s (say up to about 100k in all) and larger SPIAs much later in life (about 100k age 75 and another 100k around 85 if I am still alive). Choose your company carefully - mine is one of the top 3. The first deferred annuity I bought last year will generate 12% per year from 62 until I die. I'm aware that part of the % includes repayment of principal,also discussed in other threads.

I am aware many here dislike or even hate annuities and will beat up my comments above. That's fine. This is America, people can disagree.

Good luck.

i don't think people beat you up because they hate annuities. it's in the same league of taking ss early. you buy an annuitie and you loose control of it. you take ss at 70 and you did not get payments for the 8 years up to 70.

it's the UNCERTAINTY of when you die that causes this problem. if we all knew exactly when we are going to die this would be MUCH easier.

 

[Accidental Retiree]

I can see the appeal to ObGyn of annuities, especially given that he's only using a very small part of his assets (IIRC what he's shared), phased in a few years apart.

Even if he lost them all, he'd have a boatload left and would be just fine, it seems to me, especially as he's still working and earning.

What I am curious about is why, after all he has learned here, he has not yet branched out at least a little bit into index funds, Wellesley, or something like that. Something simple to ease into investing in areas new to him.

If nothing else, investing in something simple would help him find another way to increase his monthly 'spending.'

 

[youbet]

I consistently fail to understand why people take 4% as 'though shalt never cross that line.".

I don't anybody, including here on this board, that is running their FIRE retirement plan by strictly withdrawing 4% + CPI every year repeatedly. I know it gets talked about a lot, but do you know anyone actually doing it?

 

[mickeyd]

The 4%SWR "rule" is no more a rule than the age in bonds "rule" is a rule. Both are guides to get you going if you do not have a clue where to start.

Few posters here consider either as a "rule", more of a guide for others to use.

 

[youbet]

Few posters here consider either as a "rule", more of a guide for others to use.

What others? Seriously, we talk about how dumb those folks are who "follow the 4% rule blindly" and all that. But when I stopped and thought about it, I can't name a single person doing that, here or in real life. I'm sure there is someone someplace doing it. But I haven't run across anyone yet.

 

[obgyn65]

I have never claimed to be an expert in financial matters. Please kindly remember that I still work - have not FIREd yet. Sometimes I post between two patients. I participate to this forum the best I can, in a different language than my native tongue, and cannot write as much as others have the time to do. Additionally, as mentioned before, I tend to be more a listener than a talker. This is the only place where it feels safe to share my financial information without being (too) chastised.

By the way I bought shares. See the new thread. I am proud of myself today.

People 'beat up your comments' because your posts rarely if ever do more than scratch the surface. You always tell us you're too busy to add any substance, fair enough.

 

[EvrClrx311]

Moral: Try not to retire at a market peak. Or more specifically, try not to retire when your first decade is going to be a recession, which just so happens to occur right after a the peak. Easier said than done, but if you do 4% will work very well for you.

The problem is timing, something we cannot control. Most people (not particularly those on this site) who have the ability to worry about the 4% rule watch their egg grow on the market run up. They feel euphoric near the peak. Times are good. Economy looks strong, er... at least equities do. They project back how well the last 5-10 years have been and assume it'll continue into the future. They take the leap... assuming 4% will work, as a conservative figure.

If that happens to be 1999... or 2007... or 2013(?)... they might find themselves enduring some sleepless nights.

I hope not to jump into retirement directly following a good 1-2 year period of performance. One should project their survival rate had that period of time not been so good to them and see if they still feel as confident about it. In a strange twist of fate... when times are rough and the economy is down or has endured some very bad years recently, you're looking brighter on the 4% rule (assuming your egg is large enough). Though it sure feels the opposite in reality. Emotions are a funny thing, always clouding our judgement when it comes to these things.

 

[Midpack]

Moral: Try not to retire at a market peak. Or more specifically, try not to retire when your first decade is going to be a recession, which just so happens to occur right after a the peak. Easier said than done, but if you do 4% will work very well for you.

Not really. You can't predict to begin with. At least historically, the 4% SWR rule means you had a 95% chance of success over 30 years no matter when you retired from 1871 thru 2011 (FIRECALC) even if you blindly withdrew inflation adjusted/constant spending. Trying to time market peaks/troughs is not part of the calculus.

 

[Lisa99]

I don't know of anyone doing it either, so I guess it's simply an academic discussion.

 

[Midpack]

The 4%SWR "rule" is no more a rule than the age in bonds "rule" is a rule. Both are guides to get you going if you do not have a clue where to start.

Few posters here consider either as a "rule", more of a guide for others to use.

What others? Seriously, we talk about how dumb those folks are who "follow the 4% rule blindly" and all that. But when I stopped and thought about it, I can't name a single person doing that, here or in real life. I'm sure there is someone someplace doing it. But I haven't run across anyone yet.

I don't know of anyone doing it either, so I guess it's simply an academic discussion.

I always thought the 4% SWR studies were more useful as a guide for determining a nest egg target than as an actual withdrawal methodology. But it's nice to know that from 1871 thru 2011 (FIRECALC) if anyone did blindly withdraw 4% in the first year and inflation adjusted thereafter for 30 years, they'd have a 95% probability of success in any year they started. YMMV

Not sure I've seen anyone say "dumb."