LateToFIRE
Thinks s/he gets paid by the post
- Joined
- Jun 4, 2023
- Messages
- 1,171
This thread has given me lots of food for thought, especially as I just recently FIRE'd (early 60's so not all that E). The upshot is that mostly has supported my thinking around WD rates, especially the commentary from mathjak107. I've read everything I can get my hands on with respect to the topic and run dozens of models, including my own detailed custom-built Excel spreadsheet. That and discussions like this one have gone a long ways to me getting comfortable I have "enough" despite some fairly lofty assumptions around "the number" I had previously set for myself. For the record, here's my key observations:
(1) I'm in the camp of the 4% rule being ridiculously conservative, though recognize its probably best for most folks to err to the side of caution rather than excess.
(2) I've seen credible analysis to suggest that 6-7% can deliver high +90% confidence over a 25-30 year period IF you are willing to forgo inflation increases in down years. In other words, where there is some flexibility in budget, much higher WD rates can be safely utilized.
(3) What's also clear is that the first decade of retirement will largely drive the financial risk profile of the journey - the proverbial SORR. So, one would be wise to balance the desire to BTD early on while one is fit and energetic vs the desire to preserve the portfolio in the avoidance of SORR.
(4) I suspect that if you are drifting towards a SORR iceberg, you'll probably see it coming for quite a distance and be able to take corrective action. Or if you encounter a black swan big bang, well that will hit you over head quite sharply and you'll be inclined to pull back immediately. Again, the key is having enough flex to make meaningful modifications.
In summary, I believe a high degree of caution is warranted when expenses are relatively fixed and financial resources are relatively thin (i.e. little margin for error). Where there is higher flexibility, higher risk can be responsibly taken.
(1) I'm in the camp of the 4% rule being ridiculously conservative, though recognize its probably best for most folks to err to the side of caution rather than excess.
(2) I've seen credible analysis to suggest that 6-7% can deliver high +90% confidence over a 25-30 year period IF you are willing to forgo inflation increases in down years. In other words, where there is some flexibility in budget, much higher WD rates can be safely utilized.
(3) What's also clear is that the first decade of retirement will largely drive the financial risk profile of the journey - the proverbial SORR. So, one would be wise to balance the desire to BTD early on while one is fit and energetic vs the desire to preserve the portfolio in the avoidance of SORR.
(4) I suspect that if you are drifting towards a SORR iceberg, you'll probably see it coming for quite a distance and be able to take corrective action. Or if you encounter a black swan big bang, well that will hit you over head quite sharply and you'll be inclined to pull back immediately. Again, the key is having enough flex to make meaningful modifications.
In summary, I believe a high degree of caution is warranted when expenses are relatively fixed and financial resources are relatively thin (i.e. little margin for error). Where there is higher flexibility, higher risk can be responsibly taken.