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Samurai Says: 1/2% SWR...
08-15-2020, 09:35 PM
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#1
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Recycles dryer sheets
Join Date: Mar 2014
Location: .
Posts: 382
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Samurai Says: 1/2% SWR...
When Financial Samurai wants to draw attention to his website, he un-ERs, or sets his hair on fire -- or cuts the 4% SWR by a factor of eight, to .5%.
Yes, Financial Samurai has pronounced that .5% is the new safe withdrawal rate. He bases it on the 10-year bond yield in 1998 (year of Trinity Study) vs. 10-year bond yield now:
Quote:
In 1998, the 10-year bond yield was between 4.41% to 5.6%. Let’s say the average 10-year yield rate was 5% in 1998.
Therefore, of course you’d likely never run out of money in retirement following the 4 percent rule. Back then, you could earn 1 percent more on average risk-free! ...
With the 10-year bond yield [currently] at ~0.7%, a safe withdrawal rate is actually closer to 0.5% – 0.63%. ...
Thanks to a steady decline in interest rates, [the] 4 percent rule from 1998 has declined by over 85%. In other words, we should change the name of the 4 percent rule to the 0.5 percent rule. ...
Following the 0.5 percent rule to obtain financial independence is difficult. For example, I’ve challenged myself to generate $300,000 a year in passive income. The goal of $300,000 has been carefully calculated to pay for between $150,000 – $200,000 a year in after-tax expenses.
Therefore, in order to proclaim true financial independence using the 0.5 percent rule, I would need to amass a net worth of between $30 – $40 million.
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At first, apart from guffawing, I ventured to guess that Financial Samurai was referring to someone who had a 100% bond portfolio. But in response to a comment, he noted:
Quote:
The new 0.5 percent rule takes into consideration lower structural returns in stocks and real estate. And this includes a 60/40 or 50/50 portfolio.
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Read it and weep:
https://www.financialsamurai.com/pro...thdrawal-rate/
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“We always may be what we might have been.” -- Adelaide Anne Procter
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08-15-2020, 09:54 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Jan 2020
Location: Milwaukee
Posts: 3,976
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So he wants to live more than (checks notes, 1/0.5%) 200 years?
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08-15-2020, 10:10 PM
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#3
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Recycles dryer sheets
Join Date: Mar 2014
Location: .
Posts: 382
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Out-to-Lunch: It could happen!
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“We always may be what we might have been.” -- Adelaide Anne Procter
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08-15-2020, 11:38 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Feb 2016
Location: SoCal
Posts: 1,286
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Clickbait expert.
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08-15-2020, 11:41 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2016
Posts: 8,968
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I don't know any samauai. I do have a couple of swords though.
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08-16-2020, 02:34 AM
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#6
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Full time employment: Posting here.
Join Date: Mar 2016
Location: An island off the coast of Florida. (Ok - if you really need to know it's Vero Beach)
Posts: 633
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What a knucklehead.
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DW and I are 62/62. 100% equities 31 years. FIRE'd August 2019. Non-cola pension cashed out Dec 2022 before segmentation rates reduced balance - rolled to MM fund, max SS for DH and DW at FRA. Mega retiree health available. IRA rollover from 401k Jan 2020 for NUA treatment. LTCG for 3 years. Next few years will be IRA cash withdrawals or until Stock Market recovers. AA 33% stocks, 67% MM and T-Bills. Rising equity glidepath.
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08-16-2020, 05:24 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,233
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Yes clickbait. The Trinity study didn't just analyze the 10 year rate ONLY in 1998...
__________________
TGIM
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08-16-2020, 05:53 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 1,691
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I thought there was an “expert” that believes you should never retire? So 0.0 is the new SWR?
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08-16-2020, 06:32 AM
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#9
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Recycles dryer sheets
Join Date: Mar 2014
Location: .
Posts: 382
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I wish him luck in having website clicks generate the target $30-40 million he feels he needs to retire.
__________________
“We always may be what we might have been.” -- Adelaide Anne Procter
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08-16-2020, 06:49 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 2,998
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I don't understand how he figures the SSA and private pensions would continue to pay out at their promised levels even when individuals can only make enough over time to withdraw 0.5%?
Isn't he the one who had to go back to work after retiring early? So much for his street cred.
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08-16-2020, 07:20 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
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__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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08-16-2020, 07:29 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Mar 2012
Posts: 3,931
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Quote:
Originally Posted by CRLLS
I don't understand how he figures the SSA and private pensions would continue to pay out at their promised levels even when individuals can only make enough over time to withdraw 0.5%?
Isn't he the one who had to go back to work after retiring early? So much for his street cred.
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Exactly.
Since he did an about-face a couple years ago (a few years into FIRE), he now relies on shock journalism, panning FIRE, getting the articles picked up by CNBC, Marketwatch, Yahoo, and any other outlet that will pay him...I call it "Whore Journalism".
Always, always remember - here's "an expert" who makes excuses and justifies why he is unable to get by on $265,000 a year in passive income. Does anyone not start laughing uncontrollably? Who really listens to such a person for advice?
In contrast, it's my belief that the SWR is actually higher than 4% - probably more like 6% for those who have FIREd appropriately.
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08-16-2020, 08:30 AM
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#13
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Thinks s/he gets paid by the post
Join Date: Aug 2013
Posts: 1,969
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He can keep his money and withdraw .005 ... he can't bring it after he's 6 feet underground. I'm will continue to follow the 4% withdrawal rate in retirement. LIFE IS SHORT .. and you can't enjoy money when you go up to Heaven
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No to consumerism, Living a simple life, enjoying the experience - not the material stuff
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08-16-2020, 08:45 AM
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#14
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Full time employment: Posting here.
Join Date: Jun 2014
Posts: 518
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At one time he was all bonds (and 1 or 2 homes in the bay area). Now that interest rates are near zero, real estate is pressured in San Francisco, and he has missed the entire 2009-2020 bull market, I can understand why he is thinking of a .5% SWR. For the rest of us, 3-4% are fine.
But he does need to generate traffic since he is lives off of his blog.
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08-16-2020, 11:45 AM
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#15
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Recycles dryer sheets
Join Date: Mar 2014
Location: .
Posts: 382
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In about two years he'll be advocating a 14% SWR.
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“We always may be what we might have been.” -- Adelaide Anne Procter
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08-16-2020, 12:42 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Jun 2013
Location: Bonita (San Diego)
Posts: 1,795
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I liked a lot of what he wrote early on, but stopped lending his blog credence when he just made up rules that suited things he wanted to buy. He changed his mind on how much he recommended spending on a car because he wanted a nicer car...
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"So we beat to our own drummer in the sun;
We ask for nobody's permission to run.
I just wanna live in a world like that;
Now I'm gonna live in a world like that!" - World Like That, O.A.R.
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08-16-2020, 12:43 PM
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#17
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Thinks s/he gets paid by the post
Join Date: Jun 2013
Location: Bonita (San Diego)
Posts: 1,795
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Quote:
Originally Posted by njhowie
In contrast, it's my belief that the SWR is actually higher than 4% - probably more like 6% for those who have FIREd appropriately.
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I think 4.5% is probably safe, but am using 3.5% as my target.
__________________
"So we beat to our own drummer in the sun;
We ask for nobody's permission to run.
I just wanna live in a world like that;
Now I'm gonna live in a world like that!" - World Like That, O.A.R.
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08-16-2020, 12:55 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,233
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Quote:
Originally Posted by nash031
I think 4.5% is probably safe, but am using 3.5% as my target.
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~6.5%WR has been the historical safe withdrawal %, except for the worst 5 or 6 starting periods in history and thus the 4% guidance.
If you retired in 1982, it would be over 10%, but you didn't know it at that time of course.
__________________
TGIM
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08-16-2020, 01:06 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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I don't really care what Financial Samurai says. But if the SWR is now 0.5%, that does not faze me.
With this pandemic, there's nothing to spend money on, and my expenses have been just for basic stuff. And I find out that my life is still OK. If I were to draw SS now, we could live on our SS just fine.
And I think that when this pandemic is past, I can draw 0.5% WR to supplement SS and that's plenty for travel and discretionary spending.
Yep, 0.5% WR would be a real problem for youngsters who want to ER, but I have grown old enough to be past that phase. See my signature line below.
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"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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08-16-2020, 01:20 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,173
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Forget the phake samurai. If you can find this show, and see what it means to be a real samurai.
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Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
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