Onward
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- Jul 1, 2009
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Interesting meditations on the "4% rule" from an economist at Vanguard:
Does the 4% rule hold up? | Vanguard Blog
Does the 4% rule hold up? | Vanguard Blog
FIRECalc allows you to specify a minimum ending portfolio value in the "Investigate" tab.Does anyone know of a retirement calculator that runs a simulation if one wants to keep their principle in tact or ..invade it by only some percentage over 30 years.? I suppose a cash flow calculator is what I need to be looking at.
Does anyone know of a retirement calculator that runs a simulation if one wants to keep their principle in tact or ..invade it by only some percentage over 30 years.? I suppose a cash flow calculator is what I need to be looking at.
Bottom line, the 4% “rule of thumb” is just that—a rule of thumb. It’s based on an understandable, if not particularly complex set of assumptions about behavior and historical data on the markets. And as a baseline guide for setting individuals’ spending expectations at retirement, it’s in the ballpark, generating an initial spending recommendation that is arguably close to what comes out of a more complicated analysis.
I look at it as a useful "upper bound" for planning. In other words, if I need X per year in retirement income, I know I need at least 25X saved up. Alternatively, if I believe I'll have X saved up, I can run the numbers and see if the FIRE numbers still work if I assume no more than .04*X in income from my portfolio.Some of us do not plan to ever spend a full 4% because we are not confident that the assumptions of this model will hold. But still, the 4% rule can be quite useful as a reference level even if we decide to withdraw less than that.
From the article,
That seems like a pretty fair conclusion to me. Assumptions are always a consideraton with models and can be problematic.
While 4% is a good rule for planning, and gives one a ballpark estimate when trying to determine that first year's withdrawal, I would imagine that many of us did not spend a full 4% in 2008-2009.
Some of us do not plan to ever spend a full 4% because we are not confident that the assumptions of this model will hold. But still, the 4% rule can be quite useful as a reference level even if we decide to withdraw less than that.
No, I spent much, much more ...I would imagine that many of us did not spend a full 4% in 2008-2009.