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Old 02-21-2021, 05:47 PM   #41
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What about taxes? So you take out 4 % but then in many cases will owe taxes depending which account you take it from each year.

Then you end up with less than the 4% net needed to pay your bills.

We are just a year retired and right now just taking out cash needed to meet our expenses whatever the percentage is. I haven’t paid attention to it that much. Sometimes I know we spend more than we thought. Other times not.
You will likely owe taxes every year, and it will come out of whatever is withdrawn. So you had better model your likely taxes in retirement and include it in your spending total.
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Old 02-21-2021, 05:53 PM   #42
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If you listen to his recent interview linked to somewhere on this site, when he did change it, he also said he changed the market indices that he used for calculating. I'm pretty sure the 4% and 4.5%, or maybe the 5% are not due to recent improvements in the markets or simply a sharper pencil on his part. Surely not if he is still back testing to the same dates. Unless one is invested in the indices he used just now 4% 4.5% and 5% depending on what your 60/40 AA is truly invested in. Regardless, he didn't ever blindly recommend the use of the 4% rule for any of his clients' W/D plans. At least that was my takeaway from the interview.
I've posted this months back on this forum, but he changed it to 4.5% by including a small cap allocation in his model. And it wasn't recent at all - it was over 10 years ago, so it's certainly not related to any "recent improvements in the market".

Actually, I had mentioned it was over 10 years ago in the post you responded to!
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Old 02-21-2021, 06:03 PM   #43
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Well, 10 years is recent as far as when the original study was done. And my point remains the same. Unless you are invested in specifically the ones used in his study, there is no reason to believe that 4%, 4.5% or 5% are historically safe for any generic 60/40 AA.
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Old 02-21-2021, 06:05 PM   #44
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It's interesting to see that the Bengen 4% SWR is so frequently discussed without mentioning that it applies to a very specific AA. Folks who feel they have "won the game" and go to a high percentage fixed AA or folks who like to be the river boat gambler and stay with a high equity AA have, by choice, moved away from the Bengen study and it in no way applies to them.

However, you can use FireCalc to back test your AA.
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Old 02-21-2021, 08:16 PM   #45
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It's interesting to see that the Bengen 4% SWR is so frequently discussed without mentioning that it applies to a very specific AA. Folks who feel they have "won the game" and go to a high percentage fixed AA or folks who like to be the river boat gambler and stay with a high equity AA have, by choice, moved away from the Bengen study and it in no way applies to them.

However, you can use FireCalc to back test your AA.
The Trinity Study tried different AAs, and got the 4% with very few failures result, although for some reason they switched to corporate bonds from intermediate treasuries. Looks like Bengen also did investigate a range of AAs.
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Old 02-21-2021, 08:29 PM   #46
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Well, 10 years is recent as far as when the original study was done. And my point remains the same. Unless you are invested in specifically the ones used in his study, there is no reason to believe that 4%, 4.5% or 5% are historically safe for any generic 60/40 AA.
Well I actually said "over" 10 years ago. I double-checked - it was in 2006, so 15 years ago! And that's not recent in regard to what's happening in the market.

There are no guarantees. It's possible things will be different this time.
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Old 02-21-2021, 08:37 PM   #47
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I've been pulling well over 4% for 7 years and I got more dough than when I started.

Nothing is "safe". Every time I hear the word I cringe.
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Old 02-21-2021, 09:30 PM   #48
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I've been pulling well over 4% for 7 years and I got more dough than when I started.

Nothing is "safe". Every time I hear the word I cringe.


+1. Including w*rking in stressful j*bs, which is hazardous to one’s health.
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Old 02-22-2021, 06:34 AM   #49
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I just want to know where the 4% income comes from in today's environment. Furthermore there is no 4% rule. It's just a tabulation of historical returns. It may be better or worse in the future. Good luck.
I'm an income investor, and I just looked at my REIT holdings - averaging 6% yields. My outside the market private real estate holdings are typically 7-8% preferred returns. I've been in other deals with 12% returns - but yes some risk. Sprinkle a few higher yield plays across a diversified portfolio and you can easily hit 4% yield.

I'm not positive about this but I think my cash value life insurance pays a 5% yield.
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Old 02-22-2021, 10:31 AM   #50
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+1. Including w*rking in stressful j*bs, which is hazardous to one’s health.
Doesn't have to be stressful...time and statistics can just catch up to you.

Wife's uncle just died...made it a barely a year after his cancer diagnosis at age 70, was still working full-time AFAIK.

Everyone should also remember Bernstein's 80% rule from his "Retirement Calculator from Hell" series...basically, any retirement calculator result above 80% means little because of other potential causes of failure that simply can't be financially modeled.
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Old 02-23-2021, 01:22 PM   #51
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Doesn't have to be stressful...time and statistics can just catch up to you.

Wife's uncle just died...made it a barely a year after his cancer diagnosis at age 70, was still working full-time AFAIK.

Everyone should also remember Bernstein's 80% rule from his "Retirement Calculator from Hell" series...basically, any retirement calculator result above 80% means little because of other potential causes of failure that simply can't be financially modeled.


For sure. My dad still works as a mechanical engineer at 81! I’d worry more about him if he wasn’t working. I, however, had to get away from decades of “managing” other humans and being accountable for the team’s revenue generation. It wasn’t fun anymore, I’d get too angry at constantly being asked to do more with less and the “What have you done for me lately?” questions. Docs told me I have a heart murmur and a terrible case of sleep apnea, which I’m treating well. Anyway, I reached “enough” at 54 and bailed.

Thanks for Bernstein 80% Rule, which I hadn’t seen but which makes sense to me. FWIW as one reference point, Vanguard Personal Advisor Services aims to keep us above 85%, which is in the Bernstein ballpark.
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Old 02-23-2021, 02:06 PM   #52
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Thanks for Bernstein 80% Rule, which I hadn’t seen but which makes sense to me. FWIW as one reference point, Vanguard Personal Advisor Services aims to keep us above 85%, which is in the Bernstein ballpark.
IIRC, in that article, Bernstein is trying to capture events we can't adequately plan for such as the collapse of our civilization. I have interpreted his comments to mean if you have a financial calculator that shows a 100% probability of success discount it by 20% to include the risks that weren't modeled, societal collapse.

But, personally I tend to ignore the risks he is illustrating since I have little or no control over them. If society collapses, it does not matter if I am working, retired or how well my retirement is funded. It may all disappear. But, I think that is his point.
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Old 02-23-2021, 03:11 PM   #53
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But, personally I tend to ignore the risks he is illustrating since I have little or no control over them. If society collapses, it does not matter if I am working, retired or how well my retirement is funded. It may all disappear. But, I think that is his point.
Hear hear!

Personally I disregard Bernstein's 20% because the last thing I need is adding an additional risk to the pile. Like what if society doesn't collapse, we don't get hit by a meteor, I don't die young....? Given 80% outranks 20% anyway the bigger risk is living a long time and running out of money because somebody was betting on the 20%.
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Old 02-23-2021, 06:42 PM   #54
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Yes, but there aren’t really any rules. The withdrawal amount can easily be adjusted downward if the market is doing poorly, as long as spending can be adjusted.
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Old 02-25-2021, 11:09 AM   #55
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I've only read the first page of this thread, but what hits me is that I interpreted this rule, apparently, differently than most of you. Why? My kids are more successful than I ever was and they DON'T need any inheritance. so? so, I plan to have nothing left in my IRA at age 90. Note: my wife and I get the max SS and a nice pension. At age 90, we can live on that income, while eating oatmeal and watching TV. Meanwhile, I can spend a little more than the 4%.
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Old 02-25-2021, 12:11 PM   #56
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I've only read the first page of this thread, but what hits me is that I interpreted this rule, apparently, differently than most of you. Why? My kids are more successful than I ever was and they DON'T need any inheritance. so? so, I plan to have nothing left in my IRA at age 90. Note: my wife and I get the max SS and a nice pension. At age 90, we can live on that income, while eating oatmeal and watching TV. Meanwhile, I can spend a little more than the 4%.


Heck, yes. Why not?
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Old 02-25-2021, 12:17 PM   #57
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I've only read the first page of this thread, but what hits me is that I interpreted this rule, apparently, differently than most of you.
Well, how are you interpreting it? I just re-read the first page, and I don't see anyone (except for the OP, who was seeking understanding) who interpreted it in a way inconsistent with your post.
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