Interesting Bill Bengen (Father Of 4% Rule) Video

[RetiredAt49]

Bill Bengen is the founder/father of the 4% retirement withdrawal strategy. He was recently a guest speaker on Rob Berger's YouTube channel and I was shocked to learn various things:

1. The 4% rule is actually 4.7%.
2. Bill himself does not follow the 4% rule/guidelines/recommendations (e.g. he has nearly pulled completely out of equities market and his portfolio has a large cash position).
3. Bill uses a 3rd party service to help him determine his AA
4. The 4% rule is different between taxable and tax deferred accounts.
5. At the end of the day, I'm just personally shocked he doesn't follow his own recommendation/guidelines.

Here's the YouTube link: https://youtu.be/sGs-Slvf-bU

 

[Running_Man]

He uses a timing service to determine how much to invest in stocks. This is typical, get rich with selling generic market rules and encouraging stay invested through all times and doing the exact opposite for your own portfolios. He does not even worry about the tax effects.

 

[bmcgonig]

He uses a timing service to determine how much to invest in stocks. This is typical, get rich with selling generic market rules and encouraging stay invested through all times and doing the exact opposite for your own portfolios. He does not even worry about the tax effects.

I don’t think he sold anything. He did some research, wrote some papers about the minimum withdrawal, that’s it. It’s just research and if I was an advisor I’d be very aware of it and counsel people to pay heed to it.

Doesn’t mean that I myself need to take that advice. It would just mean that I choose to be “less safe”.

And in truth it never was a rule in that he or anyone else must follow something. It’s really just a warning.

 

[Running_Man]

I don’t think he sold anything. He did some research, wrote some papers about the minimum withdrawal, that’s it. It’s just research and if I was an advisor I’d be very aware of it and counsel people to pay heed to it.

Doesn’t mean that I myself need to take that advice. It would just mean that I choose to be “less safe”.

And in truth it never was a rule in that he or anyone else must follow something. It’s really just a warning.

Immediately after publishing his paper he opened a money management company investing over 35 million which he sold and retired from in 2013 after selling the firm. Prior to the paper he worked in the family Pepsi business.

 

[gcgang]

Bill Bengen is the founder/father…

[*]At the end of the day, I'm just personally shocked he doesn't follow his own recommendation/guidelines.

https://youtu.be/SjbPi00k_ME

Trying to time the market? I’m shocked, just shocked to learn there’s gambling going on here.

 

[enjoyinglife102]

Just add him to the list of nobody follows that "rule".

 

[RetMD21]

Immediately after publishing his paper he opened a money management company investing over 35 million which he sold and retired from in 2013 after selling the firm. Prior to the paper he worked in the family Pepsi business.

Wikipedia has a different timeline. Sold the soft drink business, moved to California, worked as a financial planner until he retired.

I don't think he meant for people to actually take and inflation adjusted 4 or 4.7% withdrawal in real life

 

[arcyallen]

I think it's a good example that we're all human, and that most people make emotional decisions with their money even if they know it's not logical. Knowing what he knows and cashing out in anticipation of future market movements is a great example. It makes me a little sad, but again, we're only human.

 

[athena53]

I'm not surprised- zillionaires can do things that don't apply to the rest of us. If you have enough $$ you can do just fine on 100% cash for the rest of your life. I'm not sure what that number is but it's something greater than what I have.

As for the 4% rate- every time the market tanks I see "experts" proclaiming that maybe it should be 2%. Since the 4% was apparently developed using scenarios that included market crashes I'm not sure why they say to adjust. Eight years out, my 3.5% rate seems to be working very well.

 

[TOOLMAN]

I subscribe to Rob Berger's youtube channel. He makes a lot of sense to me.

Bill Bengen is a market timer and has subcontracted out the timing. Don't think market timing works otherwise these guys would have all the money. He did have one good idea.

Look at the biggest downturns in history. Here the richest guys also got hit. If the market timers were right, they would also be the richest guys, but they are not.

 

[Time2]

With the recent market drop, We are at 3.1%, it was about 2.5% before the recent market drop. In two years 8 months, we'll start SS and it will drop to under 1%. I use the 4% as a gauge, to know with our low withdrawal rate, things should work out fine, even in the worst economic scenario.

 

[Dtail]

I use the 4% as a guidance indirectly through the retirement calculators.
In the end, he is market timing like many others, but probably doesn't matter to his ultimate wealth.
The 4% guidance was and is still a good reference point, especially as a guidance as to whether one is ready to retire. Remember the 7% guidance from Peter Lynch, totally ignoring SORR.

 

[Markola]

In reading these boards over the years, I don’t think ANYONE uses the 4% Rule in its pure form. People always make exceptions, use different numbers, include other assets and allocations, and fail to have retirements that last precisely 30 years.

 

[Koolau]

In reading these boards over the years, I don’t think ANYONE uses the 4% Rule in its pure form. People always make exceptions, use different numbers, include other assets and allocations, and fail to have retirements that last precisely 30 years.

Right. I used it ONLY to decide whether I had "enough" in my stash. I never actually based my withdrawals on it - although I calculated my WDR at the end of the year as a sanity check. The couple of times I went over my SWR, I chalked it up to increasing the value of my RE through improvements.

The 4% rule (and the rigorous work of Bengen, et. Al) is useful theory, but I "measure with a micrometer and cut with an ax." YMMV

 

[DrRoy]

In a year with home remodeling I took a high of 3%. This year 2% will do.

 

[athena53]

In reading these boards over the years, I don’t think ANYONE uses the 4% Rule in its pure form. People always make exceptions, use different numbers, include other assets and allocations, and fail to have retirements that last precisely 30 years.

It is a good figure to throw out when people have unrealistic expectations of how far their retirement savings will stretch. A Board I was on about 10 years ago had a post from someone who said they'd be all set to retire if they had $1 million because they could invest it at 8% and $80,000 a year was plenty for them to live on.

And yes, I DID point out that 8% was an unrealistic rate of return, you'd have to accept significant volatility to get any high rate of return, and they hadn't accounted for inflation.

 

[Markola]

It is a good figure to throw out when people have unrealistic expectations of how far their retirement savings will stretch. A Board I was on about 10 years ago had a post from someone who said they'd be all set to retire if they had $1 million because they could invest it at 8% and $80,000 a year was plenty for them to live on.



And yes, I DID point out that 8% was an unrealistic rate of return, you'd have to accept significant volatility to get any high rate of return, and they hadn't accounted for inflation.

I don’t disagree that a portfolio will likely be depleted at 8% spend, though if you play around with Portfolio Visualizer, sometimes 8% has been fine, historically, if spending commenced during a markets trough vs. peak. Of course, it all depends on one’s situation, goals, time horizon and other income streams. 4% might be much too conservative a SWR for a retiree with no heirs, social security, home equity, some modest part time income, a higher stock allocation than Bingen’s 50/50, declining spending as they age and who FIREs in the depths of a recession.

 

[SecondCor521]

As for the 4% rate- every time the market tanks I see "experts" proclaiming that maybe it should be 2%. Since the 4% was apparently developed using scenarios that included market crashes I'm not sure why they say to adjust.

Experts' opinions drift with the economic times.

I've seen recommendations on withdrawal rates, emergency fund sizes, and percent maximums for one specific stock all vary over time in predictable ways.

Nobody needed an emergency fund when the market is flying well, but a year is recommended when times are tough. Owning up to 20% of your employer's stock was fine until the dot-com bust, then 5% was considered the prudent maximum.

Similar story with withdrawal rates, although with that topic it seems people are all over the map all the time, and it's more of a Rorschach ink blot test about the advice giver's general attitude than anything else. I doubt Suze Orman will ever think retiring at 50 with any WR% would be OK.

Plus ça change, plus c'est la même chose.

 

[MarieIG]

I see it as inflation being the wild card . . .

I was not shocked, but this is not the first time I've heard that he doesn't follow the 4% adjusted for inflation rule.

I have to wonder if many don't implement some type of guardrails though - whether consciously or unconsciously. Pull out more when portfolio is growing, pull back when portfolio is shrinking with the speed of a meteor hurtling towards the earth . . .

 

[Koolau]

It is a good figure to throw out when people have unrealistic expectations of how far their retirement savings will stretch. A Board I was on about 10 years ago had a post from someone who said they'd be all set to retire if they had $1 million because they could invest it at 8% and $80,000 a year was plenty for them to live on.

And yes, I DID point out that 8% was an unrealistic rate of return, you'd have to accept significant volatility to get any high rate of return, and they hadn't accounted for inflation.

Before I knew particulars of the 4% rule, an office mate talked to a local broker and "they" decided that the broker would write covered calls and do some other stuff which would allow said office mate to take 8% of his stash. I warned him that 4% was about the max based on history. I suggested he read up on the 4% rule for himself. But, he was much smarter than I - after all he was my direct report!

Long story short, he ended up suing his broker and going back to w*rk - repositioning cars! I didn't ever say "I told you so" as it would do no good and he already knew it. Last I checked, he and his DW were BOTH still w*rking almost 20 years later. YMMV

 

[athena53]

One person here used a weighted figure of 30% of the 4% withdrawal (adjusted for inflation) calculation, 70% of 4% of the beginning of year balance. I complicate that by taking a minimum of the that and the straight 4% figure and use 3.5% instead of 4%. I'm actually staying a bit below that but that's OK- I don't have any other expensive "wants" and it's good to have a Stuff Happens cushion.

 

[Koolau]

One person here used a weighted figure of 30% of the 4% withdrawal (adjusted for inflation) calculation, 70% of 4% of the beginning of year balance. I complicate that by taking a minimum of the that and the straight 4% figure and use 3.5% instead of 4%. I'm actually staying a bit below that but that's OK- I don't have any other expensive "wants" and it's good to have a Stuff Happens cushion.

Yeah, I think most of us here have ended up using less than 4% (on average.) I have always assumed that is because we (here) saved (way) too much on average. Also, those who lived through 2008 know things can happen and one needs to be flexible. YMMV

 

[Time2]

Yeah, I think most of us here have ended up using less than 4% (on average.) I have always assumed that is because we (here) saved (way) too much on average. Also, those who lived through 2008 know things can happen and one needs to be flexible. YMMV

The best thing about 2008 is the fantastic run up from 2009 to the end of 2021 that made it possible for many of us to retire with more than we needed or expected, and able to live on less than 4%.

 

[tbis]

The thing I like about the 4% rule is that it is EASY. The best thing about it is how darn close it is to the more sophisticated financial planning calculators, which, of course it should be since those calculators are all using the same historical inputs that went into figuring out the 4% was a "safe" (zombie apocalypse aside) number.

 

[Skyward1]

He must have decided to employ the 3rd party service to determine his market timing since he admitted to botching the entrance back into the market after exiting during/prior to the 2008 financial crisis.